[Federal Register Volume 69, Number 38 (Thursday, February 26, 2004)]
[Rules and Regulations]
[Pages 9119-9171]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4249]



[[Page 9119]]

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

Part III





Department of Health and Human Services





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



Food and Drug Administration



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



21 CFR Parts 201, 606, et al.



Bar Code Label Requirements for Human Drug Products and Biological 
Products; Final Rule

Federal Register / Vol. 69, No. 38 / Thursday, February 26, 2004 / 
Rules and Regulations

[[Page 9120]]


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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Parts 201, 606, and 610

[Docket No. 2002N-0204]


Bar Code Label Requirement for Human Drug Products and Biological 
Products

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule.

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

SUMMARY: The Food and Drug Administration (FDA) is issuing a new rule 
to require certain human drug and biological product labels to have bar 
codes. The bar code for human drug products and biological products 
(other than blood, blood components, and devices regulated by the 
Center for Biologics Evaluation and Research) must contain the National 
Drug Code (NDC) number in a linear bar code. The rule will help reduce 
the number of medication errors in hospitals and other health care 
settings by allowing health care professionals to use bar code scanning 
equipment to verify that the right drug (in the right dose and right 
route of administration) is being given to the right patient at the 
right time. The rule also requires the use of machine-readable 
information on blood and blood component container labels to help 
reduce medication errors.

DATES: Effective Date: This rule is effective on April 26, 2004.
    Compliance Dates: Drug products that receive approval on or after 
the rule's effective date must comply with the bar code requirement 
within 60 days after the drug's approval date. Drug products that 
received approval before the final rule's effective date must comply 
with the bar code requirement within 2 years after the final rule's 
effective date. Specific information on how the rule will be 
implemented can be found in section II.I of this document.

FOR FURTHER INFORMATION CONTACT: Philip L. Chao, Office of Policy and 
Planning (HF-23), Food and Drug Administration, 5600 Fishers Lane, 
Rockville, MD 20857, 301-827-0587.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Comments on the Proposed Rule and FDA's Responses
    A. Who Is Subject to the Bar Code Requirement? (Sec.  201.25(a))
    B. What Products Must Have a Bar Code? (Sec.  201.25(b))
    1. Should Prescription Drug Samples Be Excluded From the Rule?
    2. Which OTC Drug Products Must Have a Bar Code?
    3. Must Vaccines Have a Bar Code?
    4. What Other Types of Drugs Should Be Subject to a Bar Code 
Requirement?
    5. Should Medical Devices Be Excluded From the Rule?
    C. What Must the Bar Code Contain? (Sec.  201.25(c)(1))
    1. Should We Require the Bar Code to Contain the NDC Number?
    2. Should the Bar Code Contain Lot Number and Expiration Date 
Information?
    3. Can Information Be Omitted from the Label to Accommodate the Bar 
Code?
    D. Does the Rule Require a Specific Type of Bar Code? (Sec.  
201.25(c)(1))
    1. Should the Rule Require Linear Bar Codes?
    2. Should the Rule Impose Any Conditions on the Bar Code?
    E. Where Does the Bar Code Go? (Sec.  201.25(c)(2))
    F. Must Blood and Blood Components Bear ``Machine-Readable'' 
Information? (Sec.  606.121(c)(13))
    G. Must Biological Products Have a Bar Code? (Sec.  610.67)
    H. What Other Comments Did We Receive?
    1. Comments Seeking More Action by FDA
    2. Comments Relating to Bar Code Problems or Quality
    3. Comments Regarding FDA's Future Involvement with Bar Codes
    4. Miscellaneous Comments
    I. How Will We Implement the Rule?
III. Legal Authority
IV. Environmental Impact
V. Paperwork Reduction Act of 1995
    A. What Is the Estimated Information Collection Burden?
    B. What Comments Did We Receive on Our Estimates?
VI. Federalism
VII. Analysis of Impacts
    A. Introduction
    B. Objective of the Rule
    C. Estimate of Preventable Adverse Drug Events and Acute Hemolytic 
Transfusion Reactions
    D. The Final Rule
    E. Description of Affected Sectors
    1. Current Machine-Readable Technologies
    2. Manufacturers and Packagers of Affected Products
    3. Retail Outlets
    4. Hospitals
    5. Nursing Homes and Long-Term Care Facilities
    6. FDA Oversight and Responsibilities
    F. Regulatory Costs of the Final Rule
    1. Introduction
    2. Costs to Manufacturers and Packagers of Affected Products
    3. Costs to Retailers and Distributors
    4. Costs to Hospitals
    5. Costs to the Food and Drug Administration
    6. Total Regulatory Costs
    G. Other Anticipated Expenditures
    H. Reduction in Preventable Adverse Drug Events and Preventable 
Acute Hemolytic Transfusion Reactions
    I. Value of Avoided ADEs and AHTRs
    1. Value of Avoided ADEs
    2. Value of Avoided AHTRs
    J. Aggregate Benefit of Avoiding ADEs and AHTRs
    K. Cost Effectiveness of Bar Coding
    L. Other Benefits of Bar Code Technology
    M. Distributional Effects of Bar Code Technology
    N. Comparison of Costs, Expenditures, and Benefits
    O. Uncertainty and Sensitivity
    1. Voluntary Share of Labeling Costs
    2. Packaging Decisions
    3. Implementation Period
    4. Value of Mortality Associated with ADEs
    5. Value per QALY
    6. Boundary Analysis
    7. Hospital Response Rates
    8. Hospital Intercept Rates with Machine-Readable Technology
    9. Productivity Losses in Hospital Wards
    10. Investments by Hospital Size
    P. Small Business Analysis and Discussion of Alternatives
    1. Affected Sectors and Nature of Impacts
    2. Alternatives
    3. Outreach
    4. What Comments Did We Receive on Our Economic Analysis?
    Q. Conclusion
    R. References

I. Introduction

    In the Federal Register of March 14, 2003 (68 FR 12500), FDA (we) 
published a proposed rule that would require certain human drug and 
biological product labels to have a linear bar code (the March 2003 
proposal). The proposal would require the bar code to contain the 
drug's NDC number. For blood and blood components, the proposal would 
require the use of machine-readable information on the container label. 
Our intent was to help reduce the number of medication errors in 
hospitals and health care settings by allowing health care 
professionals to use bar code scanning equipment to verify that the 
right drug, in the right dose and right route of administration, is 
being given to the right patient at the right

[[Page 9121]]

time. For blood and blood components, the machine-readable information 
would perform a similar function and help prevent errors such as 
transfusion errors.
    The preamble to the March 2003 proposal described the events that 
led us to issue the proposal (see 68 FR 12500 through 12503), and we 
refer readers to that preamble if they wish to obtain details on the 
events, recommendations, meetings, and literature that shaped the 
proposed rule. In brief, medication errors are a serious public health 
problem, and putting bar codes on drug products is expected to 
significantly reduce medication errors. Medication errors can occur at 
several points from the time the physician prescribes the drug to a 
patient to the time when the patient receives the drug. For example, 
the physician may write a prescription for the right drug, but in the 
wrong dose. The pharmacist might misread the prescription and provide 
the wrong drug, or read the prescription correctly and dispense the 
wrong drug. The health care professional administering the drug might 
give it to the wrong patient or give it to the right patient, but at 
the wrong time or in the wrong dose. Although most medication errors do 
not result in harm to patients, medication errors can result and have 
resulted in serious injury or death. Medication errors also represent a 
significant economic cost to the United States; one article published 
in 2001 (Ref. 30) estimated the direct cost to be $177.4 billion, while 
another (Ref. 31) estimated the cost of preventable adverse drug events 
in hospitalized patients to be $5,857 for each adverse drug event, with 
the estimated annual costs for preventable adverse drug events for a 
700-bed hospital to be $2.8 million.
    Bar codes can help reduce or detect potential medication errors by 
enabling health care professionals to check whether they are giving the 
right drug via the right dose and right route of administration to the 
right patient at the right time. The bar codes would be part of a 
system, along with bar code scanners and computerized databases, where:
    [sbull] A patient would have his or her drug regimen information 
entered into a computerized database.
    [sbull] Each drug would have a bar code. The bar code would provide 
unique, identifying information about the drug that is to be dispensed 
to the patient.
    [sbull] In hospitals, health care professionals, such as 
pharmacists and nurses, would use bar code scanners (also called bar 
code readers) to read the bar code on the drug before dispensing the 
drug to the patient and to read a bar coded wristband on the patient 
before giving the drug to the patient. In an outpatient setting, the 
health care professional (such as a pharmacist) could scan the bar code 
on the drug and compare the scanned information against the patient's 
electronic prescription information before giving the drug to the 
patient.
    [sbull] The bar code scanner's information would go to the computer 
where it would be compared against the patient's drug regimen 
information to check whether the right patient is receiving the right 
drug (including the right dose of that drug in the right route of 
administration). The system could also be designed to check whether the 
patient is receiving the drug at the right time.
    [sbull] If the identity of the health care professional 
administering the drug were desired, each health care professional 
could also have a bar code. The health care professional would scan his 
or her own bar code before giving the drug to the patient.
    Bar codes can also complement other efforts to reduce medication 
errors, such as computer physician order entry (CPOE) systems (where a 
physician enters orders into a computer instead of writing them on 
paper, and the order can be checked against the patient's records for 
possible drug interactions, overdoses, and patient allergies) and 
pharmacy-based computer systems that use a bar-coded NDC number to 
verify that a consumer's prescription is being dispensed with the 
correct drug.
    We (FDA) held a public meeting on July 26, 2002, to discuss a 
possible rule to require bar codes on human drug products, blood, and 
blood components (see 67 FR 41360, June 18, 2002). Nearly 400 
individuals attended that public meeting, and many submitted comments 
to us. We then published the March 2003 proposal. The March 2003 
proposal would create a new Sec.  201.25 (21 CFR 201.25) entitled ``Bar 
Code Label Requirements.'' (For biological products other than blood 
and blood components, the bar code requirement would exist through a 
cross-reference at a new Sec.  610.67 (21 CFR 610.67.) The proposal 
also would amend the preexisting, voluntary provision regarding 
``machine-readable'' symbols on blood and blood component container 
labels at Sec.  606.121(c)(13) (21 CFR 606.121(c)(13) to require the 
use of machine-readable information.
    We received approximately 190 comments on the proposal, and almost 
all comments supported the rule in whole or in part. For example, one 
comment said that ``FDA is to be highly commended for both the proposed 
regulation and the process leading to it'' while another said that the 
rule was an ``excellent step toward reducing medication errors.'' Other 
comments reported favorably on their own experiences with bar codes on 
drugs. One comment from a hospital said that the hospital had recently 
begun bedside verification of medications, using bar codes, and that 
the bar codes were a valuable tool for reducing medication errors. A 
comment from a health professional noted that his health care system 
used bar codes to dispense patient medications and those using robots 
to dispense medications reduced the manual error dispensing rate by 50 
percent.
    A few comments, however, were skeptical about the value of bar 
coding drugs. For example, one comment described problems associated 
with installing new technology in old buildings. The comment also 
feared that our rule would cause hospitals to lose their accreditation 
if they did not adopt bar coding technology. Another comment expressed 
concern about the impact on nurses' workloads. The comment said bar 
codes on drugs could cause nurses to spend more time administering 
medications because of scanning errors or problems with the bar code, 
but concluded that ``the ultimate outcomes will be worth the investment 
for the manufacturers, the providers, and ultimately the patients.''
    After reviewing the comments, FDA made several changes to the rule. 
The principal changes between the proposed and final rule are as 
follows:

[[Page 9122]]



------------------------------------------------------------------------
               Proposed Rule                         Final Rule
------------------------------------------------------------------------
Would apply to prescription drugs (except   Applies to most prescription
 for samples) and to over-the-counter        drugs (except for samples,
 drugs commonly used in hospitals and        allergenic extracts,
 dispensed pursuant to an order              intrauterine contraceptive
                                             devices that are regulated
                                             as drugs, medical gases,
                                             radiopharmaceuticals, low-
                                             density polyethylene form
                                             fill and seal containers,
                                             and prescription drugs sold
                                             directly to patients) and
                                             to over-the-counter drugs
                                             commonly used in hospitals
                                             and dispensed under an
                                             order. We explain the
                                             reasons for exempting
                                             certain prescription drugs
                                             in section II.B.4 of this
                                             document.
-------------------------------------------
Did not contain a general exemption         Contains a limited, general
 provision                                   exemption provision. We
                                             explain the reasons for
                                             creating a general
                                             exemption provision in
                                             section II.B.4.c of this
                                             document.
-------------------------------------------
Would require a linear bar code that meets  Requires a linear bar code
 Uniform Code Council standards              that meets Uniform Code
                                             Council standards or Health
                                             Industry Business
                                             Communications Council
                                             standards. We explain the
                                             reasons for this change at
                                             section II.D.1 of this
                                             document.
-------------------------------------------
Would create a 3-year implementation        Establishes different
 period                                      compliance dates depending
                                             on when a drug was
                                             approved. In general, the
                                             rule is effective 60 days
                                             after date of publication
                                             in the Federal Register. If
                                             a drug receives approval on
                                             or after the effective
                                             date, it must comply with
                                             the bar code requirement
                                             within 60 days of the
                                             drug's approval date. If
                                             the drug received approval
                                             before the rule's effective
                                             date, it must comply with
                                             the bar code requirement
                                             within 2 years of the final
                                             rule's effective date. For
                                             blood and blood components,
                                             a 2 year compliance date
                                             exists. We explain the
                                             implementation of this rule
                                             at section II.I of this
                                             document.
------------------------------------------------------------------------

    We describe and respond to the comments in section II of this 
document. To make it easier to identify comments and our responses, the 
word ``Comment,'' in parentheses, will appear before the comment's 
description, and the word ``Response,'' in parentheses, will appear 
before our response. We have also numbered each comment to help 
distinguish between different comments. The number assigned to each 
comment is purely for organizational purposes and does not signify the 
comment's value or importance or the order in which it was received.

II. Comments on the Proposed Rule and FDA's Responses

A. Who Is Subject to the Bar Code Requirement? (Sec.  201.25(a))

    Under proposed Sec.  201.25(a), manufacturers, repackers, 
relabelers, and private label distributors of human prescription drug 
products and over-the-counter (OTC) drug products regulated under the 
Federal Food, Drug, and Cosmetic Act (the act) or the Public Health 
Service Act (PHS Act) would be subject to the bar code requirement 
unless they are exempt from the establishment registration and drug 
listing requirements in section 510 of the act (21 U.S.C. 360).
    In the preamble to the proposed rule (68 FR 12500 at 12503), we 
acknowledged that some hospitals place bar codes on drugs themselves 
and have reduced their medication error rates significantly, but we 
stated that requiring manufacturers, repackers, relabelers, and private 
label distributors to bar code their own products should be more 
efficient and result in better quality bar codes because manufacturers, 
repackers, relabelers, and private label distributors generally have 
sophisticated manufacturing processes, labeling machinery, and quality 
control systems that hospitals cannot afford. We added that bar coding 
by third parties (such as hospitals) could increase the possibility of 
a label error through the attachment of the wrong bar code and could 
lead to inconsistent bar code quality; in fact, one organization that 
submitted a comment at our public meeting on July 26, 2002, estimated 
the error rate in hospital labeling to be approximately 17 percent 
nationwide.
    We also stated that requiring manufacturers, repackers, relabelers, 
and private label distributors to bar code their own products and to 
use the same bar coding standard would result in a more uniform bar 
coding system that could be used regardless of a patient's or 
hospital's location in the United States, and that this uniformity 
would also make it easier for health care professionals to train 
themselves on bar coding procedures and technique and make it easier 
and less expensive for hospitals to buy bar coding equipment.
    (Comment 1) One comment stated that hospital pharmacies should be 
subject to the bar code requirements. The comment explained that 
hospitals frequently compound drugs for pediatric use and that omitting 
such compounded drugs from the rule would leave ``infants and children 
without the protections that bar codes are intended to provide.''
    Another comment argued that we should exempt nuclear pharmacies 
from the rule. The comment claimed that a bar code requirement would 
subject hospital personnel and employees to additional radiation 
(because they would have to scan the bar codes).
    (Response) Section 510(g)(1) of the act states that pharmacies
    which maintain establishments in conformance with any applicable 
local laws regulating the practice of pharmacy and medicine and 
which are regularly engaged in dispensing prescription drugs or 
devices, upon prescriptions of practitioners licensed to administer 
such drugs or devices to patients under the care of practitioners in 
the course of their professional practice, and which do not 
manufacture, prepare, propagate, compound, or process drugs or 
devices for sale other than in the regular course of their business 
of dispensing or selling drugs or devices at retail
    do not have to register their establishments or list their products 
with FDA. Thus, if a pharmacy is exempt, under section 510(g)(1) of the 
act, from our establishment registration and drug listing requirements, 
the pharmacy is not subject to the bar code requirements.
    We also note that drugs compounded at pharmacies generally would 
not have NDC numbers. NDC numbers are assigned to drugs that are listed 
under section 510(j) of the act, but, as we

[[Page 9123]]

explained earlier, section 510(g)(1) of the act would exempt a pharmacy 
from the registration and listing requirements. Consequently, a 
compounded drug would not be listed, would not be assigned an NDC 
number, and would therefore lack the information required to be in the 
bar code.
    Regarding the comment claiming that a bar code requirement would 
lead to greater radiation exposure for nuclear pharmacy employees, the 
comment did not provide any evidence or data to show that using a bar 
code scanner would constitute a significant or even appreciable risk or 
that bar code scanners would undermine or compromise any existing 
measures taken to protect such employees from radiation exposure. 
Nevertheless, as we explain in our response to comment 24 in section 
II.B.4.b. of this document, we have decided to exempt 
radiopharmaceuticals from the bar code requirement.
    (Comment 2) One comment said we should exempt hospitals, 
institutional providers, and large clinics from the rule. The comment 
interpreted the rule's reference to repackers and relabelers as 
covering hospitals and other providers and said that hospitals and 
other providers would still have to repack and relabel drugs (such as 
intravenous solutions and mixes). The comment declared it would be 
``unrealistic'' to expect hospitals and other providers to obtain NDC 
labeler codes and ``participate in the NDC system.''
    In contrast, several comments said we should extend the rule to 
hospitals or expressed disappointment that the rule did not require 
hospitals to use bar codes. For example, one comment said the Federal 
Government should establish requirements so that hospitals would have 
to adopt technologies to use the bar codes. Another comment said that 
we should ``encourage,'' but not require, hospitals to use bar code 
technology. The comment said that most hospitals would find it 
difficult to adopt bar code technology due to the age of their 
buildings and their construction.
    Another comment asked us to clarify that relabeled, repackaged, or 
privately labeled drugs must have their own NDC numbers. The comment 
said that hospitals and pharmacies must not use the same NDC number 
that the drug's manufacturer used.
    (Response) Some comments appear to have misinterpreted the rule. 
Repackers, relabelers, and private label distributors that are exempt 
from the establishment registration and drug listing requirements in 
section 510 of the act (see 68 FR 12500 at 12503; see also proposed 
Sec.  201.25(a)) are not subject to the bar code requirements. 
Hospitals, clinics, and public health agencies that ``maintain 
establishments in conformance with any applicable local laws regulating 
the practices of pharmacy or medicine and that regularly engage in 
dispensing prescription drugs * * * upon prescription of practitioners 
licensed by law to administer these drugs to patients under their 
professional care'' are exempt from the establishment registration 
requirements (see Sec.  207.10(b) (21 CFR 207.10(b)); as a result, such 
hospitals, clinics, and public health agencies are also exempt from the 
bar code requirements.
    The rule also does not require hospitals to use or adopt bar code 
technology. Hospitals are free to decide whether to take advantage of 
the bar codes on human drug and biological products. Our legal 
authority, in this case, extends to the products and not to hospitals. 
Nevertheless, we advise hospitals and other potential bar code users 
that we are aware of electromagnetic interference (EMI) problems 
associated with the use of wireless technology products, such as cell 
phones, local area networks (LANs), and personal digital assistants 
(PDAs), in the vicinity of electrically-powered medical devices. EMI 
problems are a particular concern in health care facilities as well as 
home care settings. We caution that wireless bar code scanning 
technologies may present similar concerns about their electromagnetic 
compatibility (EMC) with other hospital equipment. We encourage 
hospitals and other potential bar code users to consider EMC with 
medical devices when developing their policies and implementing a bar 
code scanning system. Additional information about EMC with medical 
devices is available at http://www.fda.gov/cdrh/emc.
    We recommend that interested parties gather information and conduct 
research about wireless bar code scanners (or other scanning or reading 
equipment) and their EMI potential on other medical devices. We also 
encourage voluntary standards development organizations, such as the 
Association for the Advancement of Medical Instrumentation, the Joint 
Commission on Accreditation of Healthcare Organizations (JCAHO), the 
American National Standards Institute (ANSI), and the International 
Electrotechnical Commission (IEC) to work with us toward the goal of 
coordinated policies, research, and standards development to ensure a 
base level of EMC in all health care facilities. This would include 
recommendations for safely deploying wireless technology in hospitals 
and health care facilities.
    As for entities that repack or relabel drugs, if a repacker, 
relabeler, or private label distributor is subject to the establishment 
registration requirement at section 510 of the act, then that person 
would also be subject to the bar code requirements. We would expect 
that repacker, relabeler, or private label distributor to use its own 
NDC numbers on its products. In other words, a manufacturer, repacker, 
relabeler, or private label distributor must not use an NDC number that 
is not assigned to it. Use of another establishment's NDC number in the 
bar code would cause the product to be misbranded under section 502(a) 
of the act (21 U.S.C. 352(a)) because the drug's label would be 
misleading.

B. What Products Must Have a Bar Code? (Sec.  201.25(b))

    Proposed Sec.  201.25(b) would require bar codes on the labels of:
    [sbull] All human prescription drug products, excluding samples;
    [sbull] Biological products; and
    [sbull] OTC drug products that are commonly used in hospitals and 
dispensed pursuant to an order.
    We proposed to exclude prescription drug samples because most 
samples are given to patients at physicians' offices, and we did not 
believe that physicians or patients would have or be inclined to buy 
bar code scanners for their own use in the immediate future. We invited 
comment as to whether we should require bar codes on prescription drug 
samples and sought cost and benefit data associated with placing bar 
codes on such samples (see 68 FR 12500 at 12505 and 12529).
    As for OTC drug products, the phrase ``commonly used in hospitals'' 
reflected our primary focus of helping to reduce the number of 
medication errors occurring in hospitals. We added the phrase, 
``dispensed pursuant to an order,'' because we knew that some products 
that are regulated as OTC drug products, such as mouth rinses and 
toothpastes, are not likely to contribute to medication errors, and are 
not dispensed in hospitals pursuant to a physician's or health care 
professional's order. Thus, the phrase, ``dispensed pursuant to an 
order,'' was designed to capture those OTC drug products that are 
likely to contribute to medication errors. The preamble to the proposed 
rule invited comment as to whether there was a better way to describe 
the types of OTC drug products that should have a bar code (see 68 FR 
12500 at 12506 and 12529).

[[Page 9124]]

    The preamble to the March 2003 proposal also invited comment on 
whether any specific product or class of products should be exempt from 
the rule and the reasons for an exemption (see 68 FR 12500 at 12511 
through 12512 and 12529).
1. Should Prescription Drug Samples Be Excluded From the Rule?
    (Comment 3) Several comments said we should require bar codes on 
prescription drug samples. One comment stated that bar codes on samples 
would make it easier to monitor inventory or distribution to patients. 
Another comment said that prescription drug samples are ``commonly 
dispensed in numerous hospital settings,'' such as emergency 
departments, and that ``the very nature of treatment and medication 
administration (in an emergency department) presents unique challenges 
for which bar coding would prove instrumental.'' The comment also 
stated that JCAHO requires institutions to have policies and procedures 
in place to control drug samples and requires quick retrieval of 
recalled drugs, so hospitals must keep detailed records, ``often 
including lot and expiration date, of drug samples dispensed to 
patients.'' Another comment suggested that, rather than require bar 
codes on all prescription drug sample labels, we could simply require 
bar codes on the outer package because patients receive the entire 
package rather than a portion of a drug sample.
    Other comments also wanted bar codes on prescription drug samples 
for reasons unrelated to medication errors. For example, one comment 
said that bar codes on prescription drug samples would reduce the 
amount of time spent tracking samples. Another comment said that bar 
codes could help pharmacists identify samples that patients present to 
them; the comment said that patients sometimes bring prescription drug 
samples to pharmacists because they wish to continue receiving the same 
drug. A third comment said clinicians might be confused if they had to 
follow one procedure for bar coded prescription drugs and a different 
procedure for nonbar coded prescription drug samples.
    Conversely, several comments agreed with our decision to exclude 
prescription drug samples from the bar code requirement. The comments 
said there would be no benefit to bar coding such products, although 
one comment suggested that we conduct a study to see how prescription 
drug samples are used in institutional settings and to determine 
whether they should be the subject of a future rulemaking. Another 
comment agreed that bar coding prescription drug samples would not 
enhance patient safety, but said that one possible benefit would be 
that manufacturers could monitor disbursement of prescription drug 
samples.
    Other comments suggested that bar codes on samples could be 
voluntary or noted that bar codes can fit easily on prescription drug 
samples because their packaging is often larger than unit-dose 
packaging (so that it is technologically feasible to put bar codes on 
prescription drug packaging) and that the Uniform Code Council (UCC) 
system requires bar codes on promotional products such as samples.
    (Response) We decline to require bar codes on prescription drug 
samples. The comments did not offer any data to contradict our position 
that most prescription drug samples are dispensed by physicians in 
their offices and that physicians and patients will not be inclined to 
buy or use bar code scanners. We realize that bar codes could help with 
inventory control and help monitor distribution of samples, but those 
objectives have no bearing on medication errors or drug safety and are 
outside the scope of this rule.
    Although one comment did claim that prescription drug samples are 
commonly dispensed in hospitals, particularly in emergency departments, 
we could not determine whether the comment meant to say that hospitals 
administer samples to patients or whether they simply provide samples 
to patients to take home. We also could not determine whether such 
practices are common in hospitals, but note that, under section 503(d) 
of the act (21 U.S.C. 353(d), hospitals may distribute prescription 
drug samples at the direction of a practitioner who is licensed to 
prescribe such drugs and who received such samples. (However, sections 
301(t) (21 U.S.C. 331(t)) and 503(c) of the act prohibit the sale and 
purchase of drug samples.) If we assume that the comment pertained to 
distribution of samples in hospitals, then we reiterate that the 
physicians directing the distribution of the samples and the patients 
receiving such samples will not be inclined to buy or use bar code 
scanners. Consequently, requiring bar codes on prescription drug 
samples would have little benefit insofar as medication errors are 
concerned.
    As for the possible use of bar codes in helping pharmacists 
identify drugs presented by patients, we note that part 206 (21 CFR 
part 206) requires imprinting on solid oral dosage forms. The code 
imprint was designed to help identify solid oral dosage forms, 
particularly in emergency situations, and to help consumers and health 
care professionals identify drugs (see 58 FR 47958, September 13, 1993; 
part 206). Thus, drug imprinting already exists to help emergency 
departments, and pharmacists can also use the imprint codes to help 
identify samples presented to them by patients.
    As for the voluntary use of bar codes on prescription drug samples, 
we do not object to such use.
2. Which OTC Drug Products Must Have a Bar Code?
    (Comment 4) Several comments focused on OTC drug products. One 
comment agreed that only OTC drug products commonly used in hospitals 
and dispensed pursuant to an order should be required to have bar 
codes. In contrast, an OTC drug firm stated that the rule's description 
of OTC drug products might be clear to hospitals, but was unclear to 
OTC drug manufacturers. The comment said that, instead of describing 
the OTC drug products that must have a bar code, we should list OTC 
drug products, categories of OTC drug products, and/or ingredients that 
do not require bar codes. The comment said such a list would give 
``clear direction'' as to those OTC drug products that are subject to a 
bar code requirement.
    Two other comments expressed similar views on listing OTC drugs. 
One comment said we should list categories of OTC drug products that 
would not have to have a bar code, whereas another comment said we 
should list the types of OTC drugs that would or should be subject to a 
bar code requirement.
    (Response) We decline to revise the rule to describe the OTC drug 
products that would be subject to Sec. Sec.  201.25 and 610.67 in terms 
of specific drugs, categories, or ingredients. The comments' suggestion 
that we list OTC drug products, categories, and/or ingredients would 
effectively force us to engage in case-by-case analyses to decide 
whether a particular OTC drug, category, and/or ingredient should or 
should not have a bar code and force us to engage in repeated 
rulemakings each time we wanted to modify the list. Additionally, 
parties that objected to listing a particular OTC drug product or class 
could attempt to challenge our decisions, creating an added burden on 
our resources. The result would be a cumbersome, time-consuming, 
resource-intensive, and inefficient administrative process that would 
detract from, rather than contribute to, efforts to improve patient 
safety. The original proposal's

[[Page 9125]]

formulation makes the distinction we are trying to draw and places the 
burden on manufacturers, repackers, relabelers, and private label 
distributors of OTC drug products to determine whether their products 
are commonly used in hospitals and dispensed under an order.
    We have, however, re-worded Sec.  201.25(a) to refer to ``over-the-
counter (OTC) drug products'' and to use the shorter term of ``OTC drug 
products'' in the remainder of Sec.  201.25. This change corrects an 
oversight in the proposed rule because it referred to ``OTC drug 
products'' without explaining what ``OTC'' meant.
    (Comment 5) Proposed Sec.  201.25(b) had explained that an OTC drug 
is ``commonly used in hospitals'' if it is ``packaged for institutional 
use, labeled for institutional use, or marketed, promoted, or sold to 
hospitals.'' One comment stated that the rule's reference to OTC drug 
products packaged and labeled for ``institutional'' use was confusing 
because the rule also referred to ``hospitals.'' Thus, the comment said 
we should clearly define the sites to which bar coded products must be 
distributed and define ``hospital'' and ``institution.''
    Two other comments suggested that we interpret ``commonly used in 
hospitals'' as ``packaged for hospital use, labeled for hospital use, 
or marketed, promoted, or sold to hospitals.'' Another comment said the 
interpretation of the phrase, ``commonly used in hospitals,'' should 
depend on a combination of two or more ``indicators,'' such as 
``packaging designed for institutional use, package labeling for 
institutional use, or marketing or promotion (including through sales 
catalogues) to hospitals.'' The comment explained that our rule would 
``inadvertently sweep a far larger range of OTC medicines into the 
rule's coverage.'' It also asked us to clarify that an OTC drug 
manufacturer would not be responsible for bar coding the drug if it was 
``marketed, promoted, or sold to hospitals'' by someone else.
    (Response) The proposed rule referred to ``institutional use'' 
because we knew that some OTC drug packages and labels state that the 
drug is ``for institutional use'' or ``for institutional use only'' 
(see 68 FR 12500 at 12505). We did not intend to imply that the rule 
would cover OTC drug products that were commonly used in 
``institutions'' other than hospitals, and we have revised Sec.  
201.25(b) to replace ``institutional use'' with ``hospital use.'' 
However, we also have added the parenthetical phrase, ``or uses similar 
terms'' after ``labeled for hospital use'' to indicate that persons 
subject to the rule should adopt a common sense interpretation of Sec.  
201.25(b). For example, a manufacturer who labels an OTC drug ``for 
institutional use only'' and sells that OTC drug to hospitals should 
comply with the bar code requirement notwithstanding the fact that it 
labeled the drug ``for institutional use only'' instead of ``for 
hospital use only.'' In other words, we do not consider the OTC drug 
label's use of the word ``institution'' or its avoidance of the word 
``hospital'' as being the determining factor in whether an OTC drug 
must comply with the bar code requirement.
    As for defining what constitutes a ``hospital,'' the preamble to 
the proposed rule interpreted the word ``hospital'' as ``a facility 
that provides medical, diagnostic, and treatment services that include 
physician, nursing, and other health services to inpatients and the 
specialized accommodation services required by inpatients'' (see 68 FR 
12500 at 12517, footnote 4 of table 2). We consider this interpretation 
to be sufficient for the final rule, but decline to codify this 
interpretation in the final rule. A codified interpretation of 
``hospital'' would invite arguments as to whether a particular facility 
purchasing OTC drug products was or was not a ``hospital,'' whether the 
majority of purchasing institutions were or were not ``hospitals,'' 
and, as a result, would likely lead to further arguments about whether 
a particular OTC drug product sold to such facilities was subject to 
the bar code requirements. Engaging in such arguments would neither 
enhance patient safety, nor would it be an efficient use of our 
resources.
    We also decline to interpret ``commonly used in hospitals'' as 
requiring two or more ``indicators.'' If we were to make the change as 
suggested by the comment, fewer OTC drug products would be subject to 
the bar code rule despite their use in hospitals and despite their 
potential for causing medication errors. For example, if we interpreted 
the rule to apply only to those OTC drug manufacturers who directly 
sold their products to hospitals, then an OTC drug manufacturer could 
avoid the bar code requirement simply by selling the OTC drug products, 
complete with labeling for ``hospital use,'' to wholesalers or 
middlemen for resale to hospitals. Similarly, if we were to adopt the 
comment's suggestion to change ``packaged for institutional use'' to 
``packaging designed for institutional use,'' a firm could avoid the 
bar code requirement by making no distinction between its packages for 
retail sale and its packages for hospital use, because the package is 
arguably not ``designed'' for institutional use.
    (Comment 6) Two comments stated that the phrase, ``dispensed 
pursuant to an order,'' is inappropriate because some institutions do 
not have orders provided by physicians or because some institutions 
allow nurses to request OTC drugs. Another comment suggested that we 
refer to OTC drugs that are ``dispensed upon a prescription of a 
practitioner licensed by law to administer a drug;'' the comment said 
this language would be clearer and eliminate any confusion as to what 
constitutes an ``order.''
    Several comments suggested that we refer to ``non-prescription 
drugs used therapeutically pursuant to a prescriber's order,'' although 
one comment used the phrase ``pursuant to a rescuer's order.'' The 
comments explained that the word ``therapeutically'' would exclude OTC 
drugs such as toothpastes and mouth rinses. Another comment suggested 
that the rule state that OTC drug products ``are excluded from the bar 
coding requirements except for those OTC therapeutic drugs that are 
packaged for institutional use or specifically marketed for use in an 
institution for therapeutic purposes.''
    (Response) The word ``order,'' in Sec.  201.25(b), is not confined 
to any particular manner, document, or format for requesting a drug, 
nor is it confined to any particular type of health care professional. 
The phrase ``dispensed pursuant to an order'' should be interpreted as 
applying to an OTC drug that is to be administered to a patient as 
directed by a health care professional, regardless of whether he or she 
is a physician, nurse, or other professional. Consequently, we decline 
to revise the rule to refer to a ``prescription of a practitioner 
licensed by law to administer a drug'' because those terms would be 
more restrictive and would create more, rather than less, uncertainty 
over the rule's applicability to OTC drug products. For example, the 
word, ``prescription'' could be interpreted as requiring the 
practitioner to write a prescription for the OTC drug product before it 
could be administered to the patient. In contrast, an ``order'' could 
be an instruction written on a patient's medical chart, and could even 
be entered into the chart at the same time when the OTC drug is 
administered. As another example, the phrase, ``practitioner licensed 
by law to administer a drug'' could create uncertainty or disagreement 
as to whether a person was a ``practitioner,'' whether he or she was 
``licensed by

[[Page 9126]]

law,'' and whether that license included the ability to ``administer a 
drug.''
    Similarly, we decline to revise the rule to refer to ``non-
prescription drugs used therapeutically pursuant to a prescriber's 
order.'' There is no apparent distinction between a ``non-prescription 
drug'' and ``OTC drug product,'' and requiring such drugs to be used 
``therapeutically'' could result in disagreements as to whether a 
particular use was ``therapeutic.'' For example, a person might 
interpret ``therapeutic'' as meaning that the OTC drug product must 
have curative or healing properties and distinguish such drugs from 
those whose purpose is prophylactic or intended to prevent disease. 
Another person might distinguish between OTC drug products that provide 
symptomatic relief and ``therapeutic'' OTC drug products by arguing 
that providing symptomatic relief does not address the underlying cause 
of a disease or condition and, therefore, is not ``therapeutic.'' We 
can avoid such potential arguments by not referring to ``therapeutic'' 
use.
    We did not understand the comment that referred to a ``rescuer's 
order'' and did not believe the use of the word to be an appropriate 
substitute for an ``order.''
    (Comment 7) One comment suggested that the rule cover OTC drug 
products that are intended to be dispensed intact and in the original 
container as provided by the manufacturer, for use by inpatients. The 
comment explained that this description would cover various OTC drug 
products and also cover OTC drug products that are ``comfort 
medications'' that nurses can request without a physician's order.
    (Response) We decline to adopt the comment's suggestion. The 
comment's suggested definition would encompass some OTC drug products, 
such as mouth rinses and toothpastes, that are not likely to contribute 
to medication errors but are nevertheless dispensed intact and in the 
original container to inpatients.
    (Comment 8) One comment asked us to exclude OTC drug samples from 
the rule. The comment noted that we had excluded prescription drug 
samples because prescription drug samples are usually dispensed in 
physicians' offices and because we did not believe that physicians or 
patients would be inclined to buy or use bar code scanners. The comment 
claimed that the same rationale applied to OTC drug samples.
    (Response) We decline to amend the rule as suggested by the comment 
because an amendment is unnecessary. The rule requires bar codes only 
for OTC drugs that are ``commonly used in hospitals'' and ``dispensed 
pursuant to an order.'' OTC drug samples would fall outside this bar 
code requirement because OTC drug samples are not ``commonly used in 
hospitals'' and are not ``dispensed pursuant to an order.''
    (Comment 9) One comment from an OTC drug manufacturer asked if the 
rule applied to all packages of a specific OTC drug. The comment 
explained that the firm uses a ``modified open stock catalogue'' that 
includes all retail and some hospital-specific OTC drug products and 
that hospitals can buy products from the catalogue. The comment asked 
if the rule would require the firm to put bar codes on all OTC drug 
products in the catalogue or whether the firm could put a bar code on 
one or more OTC drug products and still offer OTC drug products without 
bar codes in the same catalogue. The comment appeared to suggest that 
hospitals could then decide which version (i.e., bar coded vs. nonbar 
coded) to buy, and the OTC drug manufacturer would still be in 
compliance with the rule.
    (Response) We interpret the comment as meaning that an OTC drug 
manufacturer may make two versions of the same OTC drug product. Both 
versions would use the same drug (in the same dosage form and 
strength); they would differ only with respect to the presence of a bar 
code on the product labels. Under such a scenario, we agree that the 
OTC drug manufacturer could, indeed, offer both the bar coded and 
nonbar coded versions of the OTC drug product in the same catalogue for 
hospital and retail sales, and we would consider the firm to be in 
compliance with the rule.
    However, if the OTC drug manufacturer had several different 
versions of an OTC drug product that is commonly used in hospitals and 
dispensed under an order, and the OTC drug manufacturer decided to put 
the bar code only on one product, we might consider the OTC drug 
manufacturer to be in violation of the rule. To illustrate, assume that 
the OTC drug manufacturer makes three different dosages of a drug: A 50 
milligram (mg) tablet, a 100 mg tablet, and a 200 mg tablet, and it 
sells all three products to hospitals. If the OTC drug manufacturer 
placed the bar code on the 50 mg tablet labels, but not on the 100 mg 
and 200 mg tablet labels, we would not consider the OTC drug 
manufacturer to be in compliance with the rule. In this scenario, we 
would expect the OTC drug manufacturer to put bar codes on the 100 mg 
and 200 mg versions of its product as well.
    (Comment 10) One comment asked us to clarify that the phrases 
relating to hospital use and to institutional use pertained only to OTC 
drug products.
    (Response) The comment understands the rule correctly. The rule 
applies to all prescription drug products (except for prescription drug 
samples, allergenic extracts, intrauterine contraceptive devices 
regulated as drugs, medical gases, radiopharmaceuticals, low-density 
polyethylene form fill and seal containers, drug products shipped by 
manufacturers, repackers, relabelers, and private label distributors 
directly to patients, and blood and blood components). We explain the 
reasons for excluding these drugs later in this section.
    Insofar as OTC drug products are concerned, the rule applies to 
those OTC drugs that are commonly used in hospitals and dispensed under 
an order.
    (Comment 11) One comment stated that we should require bar codes on 
Betadine. The comment did not explain why it singled out this 
particular OTC drug, but stated that including drugs such as Betadine 
would allow computerized databases to check for potential allergic 
reactions.
    (Response) Betadine is an iodine solution and an OTC drug product 
that is commonly used in hospitals, but only some versions are 
dispensed under an order. Thus, under the final rule, only those 
versions that are both commonly used in hospitals and dispensed under 
an order would be subject to the bar code requirement.
    While Betadine has the potential to cause allergic reactions, it 
would be impractical to revise this rule to impose a bar code 
requirement based on a drug's potential for allergic reactions. For 
example, an individual might be allergic to a color additive used in a 
drug; another individual might be allergic to a different drug 
component. Accounting for all potential allergens would require 
additional data to be encoded, and it may be difficult to accommodate 
more data on product labels.
3. Must Vaccines Have a Bar Code?
    In the preamble to the March 2003 proposal, we invited comment on 
the risks and benefits of including vaccines in the rule (see 68 FR 
12500 at 12505 and 12529). We explained that we were sensitive to 
possible adverse impacts on vaccine production and availability.
    (Comment 12) Most comments, including comments submitted by 
individual vaccine manufacturers and a pharmaceutical industry trade 
association, said vaccines should be subject to a bar code requirement. 
Some

[[Page 9127]]

comments also stated that we should require lot number and expiration 
date information to be encoded for vaccines, too, because such 
information is needed for accurate medical records.
    In contrast, several comments suggested that we consider carefully 
the impact of bar coding on vaccines. Although these comments did not 
recommend exempting vaccines from the rule, neither did they appear to 
fully support bar codes on vaccines. For example, one comment said that 
bar codes on vaccines will have minimal impact because most vaccines 
are administered in physicians' offices, and bar code scanners will not 
be readily available at those offices. Several comments, submitted by 
health professional societies or organizations, urged ``caution,'' 
stating that a bar code requirement could disrupt vaccine supplies and 
create a burden that exceeded the benefits of bar-coded vaccines. 
Another comment suggested that we create a separate regulatory process 
for vaccines and that we ``engage'' the vaccine industry to address 
data encoding issues.
    (Response) Vaccines are subject to the final rule's bar code 
requirements by virtue of being prescription drugs. The comments did 
not show that the costs of bar coding vaccines exceeded the benefits, 
and we note that vaccine manufacturers themselves did not indicate that 
a bar code requirement would adversely affect vaccine production or 
supplies.
    We decline, however, to require inclusion of lot number and 
expiration date information in a vaccine's bar code. As we stated in 
the preamble to the March 2003 proposal, the costs associated with 
encoding lot number and expiration date information appear to exceed 
the benefits (see 68 FR 12500 at 12507-12508). The comments did not 
provide evidence that would alter the cost-benefit analysis regarding 
lot number and expiration date information, so the final rule does not 
require such information in the bar code. Nevertheless, as we stated in 
the preamble to the March 2003 proposal, we will not object if firms 
voluntarily encode lot number and expiration date information (see 68 
FR 12500 at 12508).
    We also decline to establish a separate regulatory process for 
vaccines. We presented our concerns regarding bar codes and vaccines in 
a notice of a public meeting (see 67 FR 41360, June 18, 2002) and in 
the preamble to the March 2003 proposal (see 68 FR 12500 at 12504 and 
12505). This rulemaking process, therefore, has given vaccine 
manufacturers and other interested parties ample notice and opportunity 
to participate on bar coding matters, so there is no public health need 
to create a separate regulatory process for vaccine bar codes.
4. What Other Types of Drugs Should Be Subject to a Bar Code 
Requirement?
    a. Comments seeking to cover more drug products. (Comment 13) Many 
comments stated that we should require bar codes on all human drugs. 
Health care professionals and hospitals submitted most of these 
comments, but the comments frequently gave no rationale for covering 
all human drugs or argued that failure to require bar codes on all 
human drugs would force hospitals to repack drugs and apply bar codes 
themselves, thereby increasing the risk that hospitals might apply the 
wrong bar code.
    (Response) We decline to require bar codes on all human drugs. By 
focusing on prescription drugs and certain OTC drug products, the rule 
covers those drugs that are most likely to be involved in medication 
errors. We also note that the rule should reduce the need for hospitals 
to put bar codes on drugs.
    If we required bar codes on all human drugs, then some drugs (such 
as samples) would have bar codes even though they are used outside the 
hospital setting and in situations where the patient is unlikely to 
have access to, or be willing to buy, scanning or reading equipment to 
read the bar code. Other drugs, such as certain toothpastes, mouth 
rinses, and even homeopathic drugs (which are ``drugs'' under section 
201(g) of the act (21 U.S.C. 321(g)) would also have to have bar codes 
even though they are not associated with medication errors. Thus, bar 
coding all human drugs is unnecessary and would not contribute 
significantly to an overall improvement in patient safety.
    (Comment 14) Two comments asked us to require bar codes on 
investigational new drugs or asked if investigational new drugs are 
subject to the rule.
    (Response) Investigational new drugs have not been assigned NDC 
numbers because the number of investigational new drugs is constantly 
changing, and that constant change would exhaust the number of 
available NDC numbers quickly.
    In addition, bar codes on investigational new drugs also could 
result in misleading information or compromise the clinical study. For 
example, if the clinical trial involved placebo controls, and the 
placebo used the same bar code as the investigational new drug, the bar 
code could mislead the computerized database into believing that the 
patient received an active ingredient rather than a placebo. If the 
placebo used a different bar code compared to the investigational new 
drug, the different bar code would reveal the difference between the 
placebo and the investigational new drug and introduce bias into the 
clinical study. Consequently, we decline to require bar codes on 
investigational new drugs.
    b. Comments seeking to exclude specific drug products. Although 
nearly all comments supported the rule, many comments sought to exempt 
or exclude particular products or classes of products from a bar code 
requirement or asked us to create a provision allowing case-by-case 
exemptions. In contrast, many comments, submitted mostly by hospitals 
and individuals, opposed any exemptions or opposed exemptions for 
specific products.
    (Comment 15) Several comments asked us to exclude allergenic 
extracts from the rule. The comments argued that allergenic extracts 
encompass hundreds of different antigens, are sold directly to 
physicians, physician group practices, and clinics (or are not commonly 
used in hospitals) where bar code scanning equipment would not be used 
or where physicians and patients would have no incentive to buy bar 
code scanners, and that allergenic extracts do not always have NDC 
numbers. Another comment said that allergenic extracts are unique and 
tailored to each patient, so a manufacturer that had to comply with the 
bar code requirement would have to obtain NDC numbers for each extract, 
and this process would increase the likelihood of labeling errors. The 
comment also stated that a bar code requirement for allergenic extracts 
would be ``unduly burdensome'' and expensive; the comment estimated the 
cost of putting bar codes on allergenic extracts to be more than 
$120,000 for one firm alone.
    (Response) We agree that allergenic extracts are used primarily in 
physicians' offices and that physicians and patients are not likely to 
buy or use bar code scanners. Consequently, we have excluded allergenic 
extracts from the final rule.
    Because we have decided to exempt allergenic extracts, we do not 
find it necessary to address the comments' claims regarding burdens and 
costs.
    (Comment 16) Some comments asked us to exempt products that are 
packaged together (``copackaged products''). One comment gave examples 
of products sold with titration packages or sold with different 
strengths or types in a package or carton that are used together. The 
comment explained that each

[[Page 9128]]

component could have its own NDC number, and asked what NDC number 
would be used for the copackaged product.
    (Response) Even if two products are packaged together, and each 
product has its own NDC number, the copackaged product would have its 
own distinct NDC number. Thus, in the comment's example, the NDC number 
in the bar code would reflect the copackaged product and be distinct 
from the NDC numbers for the individual products, and so there is no 
reason to exclude copackaged products from the rule.
    (Comment 17) Many comments asked us to exclude medical gases from 
the rule. The comments explained that compressed and liquid medical 
gases should be exempt from the rule because:
    [sbull] Gas cylinders are located at a central supply point away 
from patients (so bar codes cannot be scanned easily);
    [sbull] There is no easy way to affix a bar code at the quick-
connect patient usage area that would discriminate between gas 
manufacturers;
    [sbull] It is not technologically or financially feasible to have 
bar codes or to expect paramedics (who may be administering a medical 
gas) to use scanners;
    [sbull] Cylinders and/or connectors are specific for gases;
    [sbull] Cylinders are color-coded to reduce the potential for 
error;
    [sbull] Gases, unlike other drugs, have dosages that vary per 
patient; and
    [sbull] There are no known adverse events linked to medical gases.
    Other comments asked us to exempt oxygen and medical gases for home 
use, stating that patients are unlikely to have bar code scanners in 
their homes, or that, for oxygen, the comment knew of no adverse 
reactions between oxygen and other drugs.
    (Response) We agree that medical gases should be exempt from the 
bar code requirement. We do not, however, agree with all of the 
comments' arguments for exempting medical gases.
    We are exempting medical gases from the bar code requirement 
because we conclude that bar codes on medical gases are not the best 
way to address medication errors associated with such drug products. We 
agree that, because medical gas cylinders are most frequently located 
at a central supply point away from patients, bar codes would not be 
scanned easily or in sufficiently close proximity to patients.
    We also agree that there is no easy way to affix a bar code at the 
quick-connect patient usage area that would differentiate among gas 
manufacturers, and that the majority of medical gas cylinders are not 
patient-specific, but, rather, are used to administer medical gas to 
multiple patients. Because of these factors, which are unique to the 
administration of medical gases, we believe that bar codes are not the 
best way to address medication errors associated with medical gases.
    We disagree with the arguments regarding the number of medical gas 
medication errors and the existence of adequate safeguards against such 
errors. The comments state that there have been very few medical gas 
medication errors. Low numbers of medication errors, alone, cannot 
justify an exemption. For example, if the type of medication error is 
serious (such as an error that results in death), then it would be 
difficult to justify an exemption on the grounds that a ``low'' number 
of deaths occur. Moreover, we have no basis to establish a threshold or 
baseline number of medication errors that would determine whether a 
particular drug had to comply with the bar code requirement. Even if we 
could establish such a threshold or baseline figure, that figure would 
be subject to challenge because health care professionals are not 
required to submit adverse event reports to us; in other words, the 
adverse event reporting system can signal the possible existence of a 
problem, but it cannot reliably predict the frequency with which such 
problems may occur.
    We also disagree with the comments' claim that current provisions 
for the color-coding of high-pressure cylinders sufficiently protect 
against medication errors. At this time, color-coding of high-pressure 
cylinders is an industry recommendation rather than a requirement, so 
we cannot assume that all affected parties will choose to follow the 
recommendation. Additionally, injuries and deaths have resulted from 
administering medical gas from incorrectly colored high-pressure 
cylinders.
    We also disagree with the comments' claim that medical gas 
containers have ``unique connectors and valves'' that decrease the 
potential for medication errors. Like color-coding, the use of unique 
connectors and valves is an industry recommendation and not a 
requirement. Our experience indicates that these connectors and valves 
can be and have been compromised such that incorrect gas has been 
administered, resulting in deaths and injuries.
    Although we do not believe that bar codes are the best way to 
reduce medication errors in the administration of medical gases, we 
recognize the need for preventing such errors and have issued guidance 
on the matter, including a ``Draft Guidance on the Current Good 
Manufacturing Practice for Medical Gases'' (68 FR 24005, May 6, 2003), 
as well as a ``Compressed Medical Gases Guideline'' (February 1989). We 
intend to continue to evaluate medication errors associated with 
medical gases, and, as necessary, we may propose a regulation to reduce 
or prevent those errors.
    (Comment 18) Two comments focused on contraceptives. One comment 
asked us to exempt oral contraceptives. The comment stated that it will 
be difficult to put bar codes on oral contraceptives because the 
tablets are contained in individual blister cells. The comment noted 
that oral contraceptives also have information regarding drug regimen 
compliance and placebos built into the package. The comment added that 
oral contraceptives are used outside the hospital setting.
    The other comment asked us to exclude the Copper T intrauterine 
contraceptive and other intrauterine devices that are regulated as 
drugs. The comment asserted that these products are inserted into 
patients by physicians, are used outside hospital settings, and present 
no potential dosage error or administration error.
    (Response) We decline to exclude oral contraceptives from the rule. 
Although oral contraceptives are contained in individual blister cells, 
those cells are usually placed in a single package with a single label, 
so the bar code would go on the label rather than on each individual 
blister cell. As for their use, we agree that oral contraceptives are 
used outside hospital settings, but do not believe that they are never 
used in hospitals.
    As for the Copper T intrauterine contraceptive and other 
intrauterine products, we agree that such products, when used as 
specified, do not present medication error risks in the same manner as 
other prescription drug products, and we have excluded them from the 
rule. (These intrauterine contraceptive products are devices, but are 
regulated as drugs.) We also note that some hospitals may have 
additional procedures, such as requiring informed consent, before these 
intrauterine products are inserted, and those procedures may further 
reduce the risk of error.
    (Comment 19) One comment asked us to exclude cosmetic-drug products 
which the comment characterized as not being subject to dosage 
limitations, such as anti-dandruff shampoo, deodorants, skin 
protectants, soaps, and sanitizers.
    (Response) We decline to amend the rule as requested by the 
comment. Most products described by the comment would be OTC drug 
products and

[[Page 9129]]

probably would not be dispensed under an order. As a result, such 
products would not be subject to the bar code requirements. (It is also 
possible that some products, such as soaps, would be considered to be 
cosmetics rather than OTC drug products and would also be outside this 
rule.) We reiterate that only OTC drug products that are commonly used 
in hospitals and dispensed under an order are subject to the bar code 
requirements.
    (Comment 20) Several comments sought an exemption for diluents. (A 
diluent is an agent, usually a liquid, that dilutes a substance (a 
drug, in this case) or makes it less potent or less irritating.) One 
comment claimed that diluents are not drugs, but acknowledged that some 
diluents do have NDC numbers. Another comment would not put bar codes 
on diluents that are packaged with another drug product because, the 
comment asserted, misidentification could occur after the diluent has 
been reconstituted with the other drug product. Another comment 
declared that bar codes on diluents should be voluntary and driven by 
the market rather than by regulation. Several other comments mentioned 
diluents or drug/diluent kits in a list of small products that, in the 
comments' view, warranted a waiver from the bar code requirement.
    (Response) We decline to exclude diluents from the rule. Diluents 
are drugs under section 201(g)(1)(D) of the act if they are intended to 
be components of a drug. We are aware of medication errors involving 
diluents, so bar codes on diluents might help reduce or eliminate such 
errors. For example, bar codes on diluents could help prevent the 
following types of medication errors involving diluents:
    [sbull] Use of the incorrect or improper diluent. Certain drug 
products are compatible with specific diluents, so using the incorrect 
diluent can compromise patient safety, especially if the incorrect 
diluent causes a precipitate to form that is not recognized when the 
drug is administered. Some precipitates are not recognizable by the 
human eye. An incorrect diluent can also be a problem if the patient 
has a particular medical condition (e.g., a diabetic patient receiving 
a diluent consisting of dextrose in water rather than normal saline). A 
bar code could alert a health care professional to the presence of an 
incorrect or improper diluent.
    [sbull] Use of the incorrect amount of diluent. This can cause an 
incorrect final concentration of a drug, resulting in either an 
overdose or underdose of the prescribed drug. A bar code could verify 
that a diluent's amount was correct.
    [sbull] Use of a diluent alone. We have reports where diluents were 
administered without the active ingredient. This error appears more 
likely to occur when the diluent and drug are removed from their 
package. In one case where a patient was supposed to receive an 
antibiotic oral suspension which was supplied as a lyophilized powder 
in a small bottle and milky white diluent in a larger bottle, the 
patient received the diluent only and not the antibiotic itself. A bar 
code could alert a health care professional that he or she is 
administering a diluent only.
    [sbull] Incorrectly packaged or labeled diluents. There have been 
cases where a package was supposed to contain a diluent and active drug 
ingredient, but the product was incorrectly packaged so that it 
contained two vials of diluent. A bar code could alert a health care 
professional that the package contains only diluents.
    If, as one comment indicated, a diluent does not have an NDC 
number, an NDC number should be obtained for that product. If a diluent 
is packaged with another drug, then, as we stated in our response to 
comment 16 of this document, the diluent, the drug, and the copackaged 
product would each have its own distinct bar code. Thus, if the diluent 
were separated from the drug in a copackaged product, the diluent would 
still have its own distinct bar code, and that bar code could be 
scanned.
    (Comment 21) One comment asked that we exclude drug products that 
are shipped directly to patients. The comment gave an example of 
peritoneal dialysis solutions and said that an exclusion would be 
appropriate because patients would not be inclined to buy and use bar 
code scanners within their homes. The comment also claimed that the 
product it shipped is not typically used in hospitals.
    (Response) We agree, in part, with the comment. If a prescription 
drug product is shipped directly from a manufacturer, repacker, 
relabeler, or private label distributor to a patient, then we will not 
require that product to be bar coded. We agree that patients will not 
have or be inclined to buy scanners for use within their homes.
    However, similiar to our response to comment 9 in section II.B.2 of 
this document, if the same prescription drug product is marketed to 
hospitals, then we will expect that drug to have a bar code. In other 
words, to use the comment's example of a peritoneal dialysis solution, 
a manufacturer could produce two different versions of the same 
product; the version sold directly to patients would not have to have a 
bar code, but the version that is intended for sale to hospitals will 
be subject to the bar code requirement. By requiring the latter version 
to be bar coded, we will help prevent or reduce medication errors in 
the hospital.
    (Comment 22) Several comments asked us to exclude nebules from the 
rule. (A nebule is a vial or container that holds a drug, usually in 
liquid form, before the drug is administered or dispensed in a device 
called a nebulizer.) The comments explained that we have been reluctant 
to approve nebules with a label due to concerns that labeling 
components could leach into the nebule and contaminate the drug. One 
comment added that, even if we were to approve a label on a nebule, it 
was unclear how a manufacturer could print the bar code.
    Another comment asked whether the rule should apply to 
pharmaceuticals packaged with low-density polyethylene (LDPE) form fill 
and seal containers. The comment explained that placing a bar code on 
such products would present a drug stability issue. The comment said 
that if the rule applied to these products, then drug manufacturers 
would need additional time to comply with the rule because they would 
need to conduct stability tests.
    (Response) The comments are correct that printing a bar code on 
such products could introduce volatile impurities into the drug 
(because the ink from the bar code could leach into the drug). We have 
provided guidance on LDPE container closure systems in ``Guidance for 
Industry on Inhalation Drug Products Packaged in Semipermeable 
Container Closure Systems'' (July 2002).
    However, we also know that some products may be packaged with a 
foil overwrap. Consequently, we are granting a limited exemption. We 
will not require a bar code on LDPE form fill and seal containers that 
are not packaged with an overwrap, due to the potential leaching and 
contamination problem. (We do not need to mention nebules in this 
limited exemption because nebules are LDPE form fill and seal 
containers.) If the product is packaged with an overwrap, then we will 
expect the bar code to be displayed on the overwrap. A bar code on the 
foil overwrap (the secondary protective packaging) for individual or 
multiple LDPE units will not be in direct contact with the drug 
product, and the foil overwrap will prevent the ink and other 
impurities from contaminating the drug.

[[Page 9130]]

    (Comment 23) One comment asked us to exclude prescription dental 
drugs from the rule. The comment claimed that prescription dental drugs 
are not used in hospitals and are applied by dentists in their offices 
or prescribed for home use, so bar codes would not be helpful.
    (Response) We decline to exclude prescription dental drugs from the 
rule. We believe that prescription dental drugs are used in hospitals, 
so bar codes on prescription dental drugs would help prevent medication 
errors.
    (Comment 24) One comment said we should exempt radionuclear drugs 
from the rule. The comment explained that the outside containers of 
radiopharmaceuticals are lead ``pigs'' that encase syringes and vials 
and are used to ship radioactive materials. The lead pigs are recycled, 
so any bar codes on the pigs would have to be removable. However, the 
comment claimed, a removable bar code on the lead pigs would require 
new labeling or shrink wrapping equipment, thus leading to a 
significant financial burden on nuclear pharmacies. The comment added 
that radiopharmaceuticals have a low ``misadministration'' rate of 30-
40 reportable ``events'' annually compared against more than 14 million 
nuclear medicine procedures in 2002. The comment also claimed that a 
bar code would require nuclear pharmacies to amend their Nuclear 
Regulatory Commission (NRC) Agreement State licenses because the 
licensing authority would have to approve all labeling changes.
    (Response) We agree that radiopharmaceuticals prepared at nuclear 
pharmacies should be exempt from the bar code requirement. The comment 
correctly stated that radiopharmaceuticals have a low misadministration 
rate. According to NRC data, the number of reportable medical 
misadministrations of radiopharmaceuticals has been in the range of 32 
to 42 out of more than 14 million administrations per year for the last 
5 years. The highest number of reportable misadministrations occurred 
in 1998, when there were 42 reportable events; this represented the 
highest total since the NRC began collecting data under the Government 
Performance and Results Act of 1992.
    Low medication error rates are not, however, sufficient to warrant 
an exemption from the bar code requirement. Instead, our principal 
reason for exempting radiopharmaceuticals is that NRC regulations 
pertaining to the medical use of radiation byproducts render bar codes 
unnecessary for patient safety. For example, NRC regulations require, 
in many cases, that radiopharmaceuticals be administered under a 
written directive that ensures verification of a patient's identity 
before each administration (see 10 CFR 35.40(a) through (b), and 
35.41(a) through (b)). We believe that NRC regulations pertaining to 
the use of radiation byproducts provide sufficient safeguards in 
preventing medication errors involving radiopharmaceuticals, and, 
because of this alternative regulatory program for these products, the 
benefits associated with a bar code would not justify the costs.
    Because we have decided to exempt radiopharmaceuticals from the bar 
code requirement, we do not need to address the comment's other claims 
regarding labeling, packaging, and financial burdens.
    (Comment 25) One comment, submitted by an OTC drug manufacturer, 
asked us to exempt its OTC drug products due to their ``distinctive 
form'' and ``clear labeling.'' The comment said that medication errors 
for its products (such as ready-to-use enemas, suppositories, and 
medicated topical creams) are ``exceedingly rare.''
    (Response) We decline to exclude OTC drug products that purport to 
have a ``distinctive form'' and ``clear labeling.'' A product's 
``distinctive form'' and labeling do not preclude the possibility of 
drug interactions, wrong drug, wrong dose, wrong route of 
administration, or other types of medication errors.
    We also decline to exclude OTC drug products, or even prescription 
drug products, from the rule even if their potential for medication 
errors is ``exceedingly rare'' (as the comment claimed). We have no 
basis to establish a threshold or baseline medication error rate that 
would determine whether a product should have a bar code, and even a 
``low'' medication error rate could result in death or harm to 
patients. Furthermore, if we linked the bar code to a drug's medication 
error rate, the result could be that a drug might be bar coded at one 
time if its medication error rate exceeded the threshold, but not bar 
coded once the medication error rate fell below that threshold, and 
this could create confusion. For example, assume that the rule based 
the bar code requirement on a medication error rate of 5 percent. If 
Drug X had a medication error rate of 5.2 percent in Year A, it would 
be bar coded. If Drug X had a medication error rate of 4.9 percent in 
Year B, then it would not be bar coded. However, in all likelihood, in 
Year B, both bar coded and nonbar coded versions of Drug X would exist 
in the marketplace. If Drug X's medication error rate was 5.1 percent 
in Year C, the drug would, again, be subject to the bar code 
requirement. In such circumstances, the bar code would lose its value 
and reliability, insofar as medication errors are concerned, because 
hospitals would confront a constantly changing environment of drugs 
that have or lack bar codes, and hospitals would either not rely on 
such codes or lose confidence in the bar code system.
    (Comment 26) One comment asked whether pharmacy-compounded 
prescription drugs would be subject to the bar code requirement.
    (Response) As we noted in the response to comment 1 of this 
document, under section 510(g) of the act, pharmacies:
    which maintain establishments in conformance with any applicable 
local laws regulating the practice of pharmacy and medicine and 
which are regularly engaged in dispensing prescription drugs or 
devices, upon prescriptions of such practitioners licensed to 
administer such drugs or devices to patients under the care of such 
practitioners in the course of their professional practice, and 
which do not manufacture, prepare, propagate, compound, or process 
drugs or devices for sale other than in the regular course of their 
business of dispensing or selling drugs or devices at retail
do not have to register their establishments or list their products 
with FDA. Thus, a pharmacy that compounds drugs in accordance with this 
provision would probably fall outside Sec.  201.25(a) and compounded 
drugs made by that pharmacy would not have to bear a bar code.
    We also note that pharmacy-compounded drugs do not have NDC 
numbers.
    (Comment 27) Several comments focused on drugs in small vials or 
containers. Comments from several drug manufacturers and a trade 
association suggested that we exempt small vials and/or small 
containers from the rule, and several of these comments mentioned 5 
milliliter (mL) vials, suppositories, small ophthalmic containers, 
prefilled syringes, and blister packs as examples of products that need 
an exemption. The comments stated that some vials or containers would 
be too small for a bar code. One comment suggested exempting vaccine 
unit-of-use containers if a manufacturer demonstrated an inability to 
apply a bar code due to space limitations.
    In contrast, several comments strongly opposed exemptions for small 
vials and ampules. These comments explained that many of these products 
are high-

[[Page 9131]]

risk medications or that most injectable products come in small vials 
or ampules. Other comments said that liquid medications are more often 
linked to medication errors than solid dosage forms, so creating an 
exemption for vials and ampules would undermine the rule's 
effectiveness. Other comments opposed exemptions for small vials 
because the absence of a bar code would force hospitals to apply bar 
codes to the products themselves, and this would create the potential 
for labeling errors by the hospital.
    One comment, submitted by the UCC, stated that, ``No [UCC] 
pharmaceutical member has presented the UCC with a healthcare product 
too small for a [Reduced Space Symbology] symbol.'' However, the UCC 
could not preclude the possibility that some small product could not be 
bar coded, although it did note that one firm had put bar codes on 
vials as small as 1 mL. The UCC comment also contained attachments 
describing how several pharmaceutical manufacturers (Abbott 
Laboratories, Baxter Healthcare Corp., Pfizer, Inc., and Aventis 
Behring) had decided to put bar codes on injectable pharmaceuticals, 
intravenous solutions, and other drug products.
    (Response) We decline to exempt small vials or containers 
(including suppositories, prefilled syringes, and other small products 
for which comments sought exemptions). We agree that the risk of 
medication errors for these products cannot be ignored, and we also 
find the UCC's comments persuasive. If several pharmaceutical companies 
have already shown their ability to place a bar code on a 1 mL vial, we 
cannot justify a blanket exemption for comparatively larger products, 
such as 5 mL vials, and prefilled syringes.
    Furthermore, we note that Sec.  201.25(c) requires the bar code to 
appear on the drug's label. For some products described by the 
comments, the drug's label appears on an overwrap or packaging. 
Alternatively, it may be possible to modify the drug's immediate 
container to accommodate a label bearing a bar code.
    c. Comments seeking a general exemption provision. (Comment 28) In 
the preamble to the March 2003 proposal, we explained our reasons for 
not including a general exemption provision (see 68 FR 12500 at 12511 
through 12512). We noted that industry-conducted pilot studies had 
placed reduced space symbology (RSS) bar codes on small vials and that 
those studies suggested that almost all products are capable of bearing 
a bar code. We also pointed out practical problems with an exemption 
provision, such as potential arguments as to whether it was 
``feasible'' to affix a bar code and the resources that would be needed 
to deal with exemption requests (id.). Nevertheless, the preamble to 
the March 2003 proposal invited comment on whether we needed to create 
a waiver provision and how we could create a provision that would 
minimize the potential for misuse (see 68 FR 12500 at 12529 (question 
8)).
    Most comments opposed a general exemption or waiver provision. The 
comments said we would find ourselves expending resources to deal with 
exemption requests and that exemptions would cause more harm than good. 
Some comments opposed creating an exemption mechanism because they 
would prefer to have manufacturers repack their products or develop 
packaging that would support a bar code. Other comments noted that, if 
we exempt various products from the rule, hospitals will be forced to 
bar code those products themselves, and this could result in labeling 
errors and require hospitals to rely on two different data systems (one 
for bar codes with NDC numbers and another for drugs that the hospital 
has bar coded itself).
    A few comments suggested that we create an exemption provision that 
would consider requests on a case-by-case basis or would be 
``limited.'' The comments did not suggest how we might prevent misuse 
of an exemption provision. Another comment asked that we define an 
exemption review process.
    (Response) Given the number of comments we received requesting an 
exemption for a specific product or class of products, the fact that 
the final rule contains certain categorical exemptions requested by 
some comments, and our inability to predict every future product or 
class of products for which an exemption might be justified, we felt it 
would be prudent to add a general exemption provision to the rule. 
Consequently, we have added a new Sec.  201.25(d) which states that we 
may, on our own initiative or in response to a written request from a 
manufacturer, repacker, relabeler, or private label distributor, exempt 
a drug from the bar code requirement. The exemption request, under 
Sec.  201.25(d)(1)(i), must document why compliance with the bar code 
requirement would adversely affect the drug's safety, effectiveness, 
purity, or potency or not be technologically feasible. The request must 
also explain why the problem cannot be reasonably remedied by measures 
such as package redesign or use of overwraps. Alternatively, under 
Sec.  201.25(d)(1)(ii), the request must document why an alternative 
regulatory program or method of product use renders the bar code 
unnecessary for patient safety. For example, as explained earlier in 
our response to comment 24 of this document, we exempted 
radiopharmaceuticals from the bar code requirement because existing NRC 
regulations on the medical use of radiation byproducts render the bar 
code unnecessary for patient safety.
    Section 201.25(d)(2) provides the address to which exemption 
requests should be sent. For human drug products, the request should be 
sent to the Office of New Drugs (HFD-020), Center for Drug Evaluation 
and Research, Food and Drug Administration, 5600 Fishers Lane, 
Rockville, MD 20857. For biological products, the request should be 
sent to the Office of Compliance and Biologics Quality (HFM-600), 
Center for Biologics Evaluation and Research, Food and Drug 
Administration, 1401 Rockville Pike, Rockville, MD 20852.
    We reiterate that we have created this general exemption provision 
to allow us to efficiently and justly address products or classes of 
products that we have not already considered. We emphasize that almost 
all drug products are capable of bearing, and should in fact bear, a 
bar code. We will not consider written requests that are based on other 
reasons (such as financial reasons, a claimed low rate of medication 
errors, or a claim that the product is somehow unique such that 
medication errors do not occur or rarely occur). Similarly, we will not 
entertain written requests seeking an exemption for a particular drug, 
class of drugs, or group of products when we have already refused to 
grant an exemption for the same drug, class of drugs, or group of 
products in this final rule. The general exemption provision is 
intended to be used in rare cases.
    If we refuse to grant an exemption in response to a written 
request, our decision can be reviewed under our existing regulation at 
21 CFR 10.75, ``Internal agency review of decisions.''
5. Should Medical Devices Be Excluded From the Rule?
    The preamble to the March 2003 proposal explained that we did not 
intend to issue any bar code requirement for medical devices at this 
time (see 68 FR 12500 at 12506). The preamble to the March 2003 
proposal stated that devices present different issues compared to human 
drug and biological products and that we would continue to study 
whether to develop a proposed rule to require bar codes on

[[Page 9132]]

medical devices to prevent or reduce medication errors (id.).
    (Comment 29) Two comments said we should reject the device 
industry's request for further study and require bar codes on devices. 
The comments said that implantable devices are made to detailed 
specifications and sometimes fail, so one could presume that a device 
manufacturer would recall defective devices. The comments added that 
bar codes on devices would help create patient records that could be 
easily searched so that hospitals could determine an appropriate course 
of action if a patient received an implantable device that was 
recalled.
    Other comments argued that we should examine the benefits of bar 
code labeling on devices or that bar codes would be helpful on certain 
devices. For example, one comment said that patient safety would be 
further enhanced by applying bar codes to devices such as blood bags, 
filters, and apheresis kits.
    Conversely, one comment agreed with our decision to omit devices 
from the rule. The comment said that devices present ``unique'' issues, 
such as product diversity, evolving coding technology, and unique 
product identification needs that are often negotiated between 
customers and device manufacturers. The comment recommended that we 
allow for voluntary use of Universal Product Numbers (UPNs) on devices 
in either the European Article Number/Uniform Code Council (EAN/UCC) or 
Health Industry Business Communications Council (HIBCC) standard. The 
comment explained that the UPN system is established and provides 
greater consistency with global identification trends compared to the 
NDC number.
    (Response) We decline to include devices in the final rule. Unlike 
drugs, medical devices do not have a standardized, unique identifying 
system comparable to the NDC number. (There is a National Health 
Related Items Code (NHRIC) system for identifying and numbering 
marketed medical device packages, but participation in the NHRIC system 
is voluntary, and the database may contain out-of-date information due 
to industry acquisitions and mergers.) The absence of a standard, 
numerical identification system comparable to the NDC number is one of 
several issues that complicate efforts to put bar codes on medical 
devices for purposes of preventing or reducing medication errors.
    We also note that permanently implantable devices are subject to 
our device tracking requirements at part 821 (21 CFR part 821), and 
those requirements can be quite detailed. For example, under Sec.  
821.25(a)(2)(iii), a device manufacturer must have a method of tracking 
each device that it distributes that enables the manufacturer to give 
FDA, within 10 working days of a request from FDA, information 
regarding the name, address, telephone number, and social security 
number (if available) of the patient receiving the device.
    As for voluntary use of UPNs on medical devices and the use of 
EAN.UCC or HIBCC standards, we recognize that some devices already bear 
a bar code for reasons relating to purchasing or inventory control, and 
we have not objected to their use nor to the bar code standards used.

C. What Must the Bar Code Contain? (Sec.  201.25(c)(1))

1. Should We Require the Bar Code to Contain the NDC Number?
    Proposed Sec.  201.25(c)(1) would require the bar code to contain, 
at a minimum, the drug's NDC number. The NDC number identifies each 
drug product that is listed under section 510 of the act or section 351 
of the PHS Act.
    (Comment 30) Two comments claimed that their products, allergenic 
extracts, do not have NDC numbers. The comments stated, as part of a 
request to have allergenic extracts excluded from the rule, that FDA 
has allowed generic groupings for allergens under one NDC number. The 
comments added that they market nearly 200 to 300 allergens in four 
different package configurations each, so, if allergenic extracts had 
to carry bar codes, the firms would need from 800 to 1,200 new NDC 
numbers respectively, and this would have ``enormous'' implications for 
the firms and FDA.
    (Response) As we stated in our response to comment 15 in section 
II.B.4.b of this document, we have excluded allergenic extracts from 
the rule. As a result, issues regarding NDC numbers for allergenic 
extracts are moot.
    (Comment 31) Several comments focused on the NDC number itself. One 
comment said that the NDC number contains the necessary information for 
bar code purposes. However, several comments argued that OTC drug 
products should be allowed to use the Universal Product Code (UPC) 
number either instead of or in addition to the NDC number. Some 
comments said that OTC drug manufacturers would incur thousands of 
dollars of ``unnecessary extra `new item' costs'' because different NDC 
numbers would be necessary for new, minor formulation changes to their 
drugs and create logistical complications for retailers (because 
retailers use the UPC codes). Two comments said that requiring OTC drug 
bar codes to contain the NDC number would increase the demand on NDC 
numbers, increase FDA's workload, or exhaust the number of available 
NDC numbers. One comment said it should be feasible for a database to 
handle both NDC and UPC numbers, whereas another comment said that 
allowing OTC drug products to continue using UPC numbers would make 
more NDC numbers available for other drug products and thus benefit the 
NDC number system.
    Another comment supported the use of the NDC number with four extra 
digits. The comment said this 15-digit number, called ``NDC Plus 
Four,'' would identify individual doses and vital information about the 
drug, including, among other things, the drug's lot number, expiration 
date, and recall status.
    Another comment asked us to change the NDC number so that it 
contained a drug's expiration date.
    (Response) We decline to amend the rule as suggested by the 
comments. The UPC code does not necessarily identify a unique drug 
product. For example, if an OTC drug manufacturer made and sold a 
particular drug product, that drug product would have a UPC code, and 
it would also have a unique NDC number. If the OTC drug manufacturer 
reformulated the product (such as changing an ingredient), the 
manufacturer could use the same UPC code for the reformulated product, 
but the reformulated drug would have a different, unique NDC number. 
This could be significant to a patient's health if, for example, the 
reformulated product contained an ingredient that caused allergic 
reactions or drug interactions. Thus, requiring the use of NDC numbers, 
rather than UPC numbers, will help ensure that the drug is identified 
correctly.
    Additionally, as we stated in the preamble to the March 2003 
proposal (see 68 FR 12500 at 12507), we intend, through a separate 
rulemaking, to change the NDC number so that it becomes a unique 
identifying number for listed drugs. If we were to allow the use of 
other coding systems, such as UPC numbers that did not contain the 
drug's NDC number or an NDC number with additional digits, persons who 
wanted to decipher a drug's bar code would need to consult multiple 
information sources, and this would increase the likelihood that some 
information and databases might not be updated as frequently as others, 
that

[[Page 9133]]

some information might be unavailable, or that the information would be 
presented in different or incompatible ways. Although we understand the 
OTC drug industry's reservations about changing UPC codes to include 
NDC numbers because of a possible cost impact, Sec.  201.25(b) only 
requires bar codes on OTC drug products that are dispensed under an 
order and are commonly used in hospitals. Furthermore, as we stated in 
our response to comment 9 of this document, we will allow OTC drug 
manufacturers to create bar coded and nonbar coded versions of the same 
OTC drug product; the bar coded versions, which would be intended for 
hospital sale and use, would carry the NDC number in the bar code. The 
versions intended for retail sale could continue to use the UPC code.
    We also decline to revise the NDC number to include expiration 
dates or to add more digits to the NDC number. Revising the NDC number 
is outside the scope of this rule. Furthermore, expiration dates vary 
with each new batch or production run, so if we were to revise the NDC 
number to include expiration dates, we would quickly exhaust the number 
of available NDC numbers and be forced either to redefine the NDC 
number or develop an alternative system relatively quickly, and other 
databases that relied on the NDC number would also be forced to adapt 
or develop new systems themselves. Restructuring the NDC number in this 
manner would, therefore, be impractical and costly.
    Similarly, adding more digits to the NDC number might be disruptive 
for those databases that already use or rely upon the NDC number. Those 
databases would either have to reconfigure themselves to handle 14-
digit numbers (assuming all preexisting NDC numbers were modified to 
contain 14 digits) or reconfigure themselves to handle 10- and 14-digit 
NDC numbers (assuming that preexisting NDC numbers remained the same, 
but new drugs would receive a 14-digit number). Such reconfigurations 
could be expensive for those who maintain the databases and those who 
use them. A 14-digit number could also be either redundant or confusing 
in comparison to the Global Trade Item Number (GTIN). As the preamble 
to the March 2003 proposal mentioned, the GTIN is a 14-digit number 
which, when used in a bar code on drug products, contains the NDC 
number in conjunction with a code that identifies the product's packing 
level (see 68 FR 12500 at 12506).
    (Comment 32) Two comments asked us to ensure that different parties 
use different NDC numbers. One comment said that the proposed rule 
failed to explain how repackers will distinguish a repacked product 
from the original manufacturer's package. The comment suggested that 
manufacturers use certain digits to signal the presence of an original 
manufacturer's package and that repackers use other digits to identify 
repackaged products. The comment said we should require repackers to 
have a manufacturer's identification number.
    The other comment asked that we ensure that hospitals do not use 
the manufacturer's NDC codes when repacking a drug.
    (Response) As we stated in our response to comment 2 of this 
document, if a repacker, relabeler, or private label distributor is 
subject to the establishment registration requirement at section 510 of 
the act, then that person is also subject to the bar code requirements 
and must use its own NDC numbers on its products. In other words, a 
manufacturer, repacker, relabeler, or private label distributor cannot 
and should not use an NDC number that is not assigned to it. Use of 
another establishment's NDC number in the bar code would cause the 
product to be misbranded under section 502(a) of the act because the 
drug's label would be misleading.
    Hospitals, though, are exempt from the establishment registration 
requirements. Consequently, hospitals themselves are not subject to the 
bar code requirement, and we consider drug repacking and dispensing 
operations inside hospitals to be within the practice of pharmacy.
    (Comment 33) Several comments addressed possible changes to the NDC 
number. The preamble to the proposed rule stated that we intended to 
redefine the NDC number through a proposed rule on drug establishment 
registration and listing (see 68 FR 12500 at 12506). Most comments 
opposed any redefinition of the NDC number. One comment said that 
redefining the NDC number would create confusion, possibly harm 
patients (although the comment did not explain how such harm would 
occur), and undermine the bar code rule. Other comments said that 
redefining the NDC number would be costly and disruptive to various 
databases that rely on or use NDC numbers. One comment said that we 
should not make a final bar code rule effective until the drug industry 
has had the opportunity to understand and comment on any changes to the 
NDC number. A different comment said we should consult various 
``stakeholders'' before we make changes to the NDC number. Another 
comment said that we did not need to redefine the NDC number because 
the GTIN would provide ``sufficient direction.''
    (Response) As we stated in the preamble to the March 2003 proposal, 
we intend to revise our drug establishment registration and listing 
regulations to make the NDC number unique and more useful to 
informational databases, whether those databases are created to prevent 
medication errors, to obtain the latest information about a drug, or to 
track drug use and distribution. We are still preparing the proposed 
rule, and when we publish it in the Federal Register, we will invite 
comment on our proposed NDC number changes. Until we revise our drug 
establishment registration and listing regulations, the current 
requirements at Sec.  207.35 continue to apply to the NDC number.
    We also must point out that, even under a proposed drug 
establishment registration and listing rule, assuming there is no 
change in the product or packaging, we do not intend to replace 
currently-used NDC numbers. For existing NDC numbers, we would consider 
issuing a new number to an existing drug product only if there were two 
drugs that had the same NDC number.
    (Comment 34) One comment criticized the NDC number, stating that it 
cannot tell whether the right dose is being administered because the 
actual dose may be a partial dose or multiple doses of the drug 
identified by the bar code. The comment said this reflected a 
technological limitation with NDC numbers, so the comment suggested 
that the computer systems used to document drug administration alert 
users and require manual intervention by health care professionals to 
verify doses.
    (Response) The comment is correct that the NDC number may have 
certain limitations when different dosages are administered from a 
single package or when partial dosages are administered. For example, 
assume that a drug's package contains 20 tablets. The drug's NDC number 
will reflect the fact that the package contains 20 tablets. If the drug 
administered to the patient consists only of one tablet, then scanning 
the NDC number for the package alone will not show the correct dose 
given to the patient. The NDC number's principal value, in this 
scenario, is verifying that the correct drug in the correct dosage form 
is being administered. As another example, some drug product labels do 
not state pediatric dosages, so a physician might prescribe a partial 
dose for a pediatric patient. In this scenario, the NDC

[[Page 9134]]

number's principal value is verifying that the correct drug, in the 
correct dosage form, is being administered.
    Regarding the comment's suggestions concerning computer systems, we 
agree that it could be helpful if a computerized database alerted 
health care professionals to check dosages given to patients. However, 
we do not intend to create, maintain, or regulate the databases that 
scanning equipment would consult to decode NDC numbers, so we advise 
parties to consider this issue when they develop computer systems 
associated with scanners to decode the NDC numbers.
2. Should the Bar Code Contain Lot Number and Expiration Date 
Information?
    The March 2003 proposal would not require the bar code to contain 
the drug's lot number or expiration date. In the preamble to the March 
2003 proposal, we explained that we were unable to show that the 
benefits associated with encoding lot number and expiration date 
information exceeded the costs, so we proposed to omit lot number and 
expiration date information from the bar code (see 68 FR 12500 at 
12507). However, we also said that we would not object if drug 
manufacturers, repackers, relabelers, and private label distributors 
decided to encode lot number and expiration date information 
voluntarily (id. at 12508). We stated that industry representatives had 
suggested that they might add such information if a demand existed for 
it (id.), but we did not know whether hospitals and other health care 
facilities would be willing to pay more for drugs that had lot number 
and expiration date information encoded in the bar code. We invited 
comment on the costs and benefits associated with putting lot number 
and expiration date information in the bar code.
    (Comment 35) Many comments urged us to require lot number and 
expiration date information in the bar code, but did not provide 
evidence to support their views. Instead, most comments declared that 
lot number and expiration date information would make it easier to 
identify recalled, contaminated, and expired drugs, would improve 
entries into medical records, or would provide greater patient safety. 
Other comments said we should phase-in a requirement to encode lot 
number and expiration date information over an extended time period, 
but did not discuss why a phased-in approach would alter the cost-
benefit problem that we identified in the preamble to the proposed 
rule. Some comments would extend the rule's effective date to give 
firms more time to encode such information. Another comment urged firms 
to encode lot number and expiration date information, but only if the 
costs were not passed on to hospitals.
    Other comments advanced different arguments for requiring lot 
number and expiration date information as part of a bar code. For 
example, one comment stated that the American Society of Hospital 
Pharmacists and others want lot number and expiration date information 
encoded, and so we should defer to them. Several comments said 
manufacturers should encode such information because they could do so 
at less cost compared to hospitals.
    Several comments advocating the inclusion of lot number and 
expiration date information in a bar code argued that technology could 
encode such information. For example, one comment claimed that the 
information can be easily encoded using two-dimensional symbologies and 
noted that some manufacturers plan to encode such information 
voluntarily. Another comment noted that the GTIN, rather than the NDC 
number alone, could be used to provide additional patient safety 
information. Another comment declared that encoding lot number and 
expiration date information could be inexpensive because, the comment 
noted, firms already print the same information, in human-readable 
form, on packages.
    In contrast, other comments supported our decision to omit lot 
number and expiration date information from the rule. Several comments 
conceded that the information could help trace recalled drugs and help 
with product inventory, but said that the information would not 
significantly reduce medication errors and that the costs of encoding 
the information would exceed the benefits. For example, one comment 
estimated that encoding lot number and expiration date information 
would cost $7,500 to $20,000 per manufacturer's line, excluding costs 
to verify the information. Several comments expressed concerns about 
the impact on production line speed. For example, one comment said that 
the online printing equipment that would be needed for encoding lot 
number and expiration date information is ``highly ineffective and 
unreliable'' at production speeds above 120 units per minute and that 
alternatives, such as preprinting labels, would present serious good 
manufacturing practice (GMP) concerns in verifying that the right label 
with the correct lot number and expiration date is used on the correct 
product. Another comment said that online printing and verification 
technology has not been demonstrated at production line speeds of 250 
to 300 units per minute. A different comment listed various problems 
associated with online printing of lot number and expiration date 
information, such as adverse impacts on line speed and print quality, 
the need to develop unique bar codes for each packaging run, and 
limiting packaging options until printing and packaging technology 
becomes capable of supporting online product speeds and adequate print 
quality.
    Another comment said we were correct to omit lot number and 
expiration date information from the rule because it would make bar 
coding more complex and perhaps discourage manufacturers from making 
unit-dose packages. The comment, along with other comments opposed to 
requiring lot numbers and expiration dates in a bar code, shared our 
view that the market would determine whether manufacturers and others 
encode lot number and expiration date information voluntarily.
    One comment suggested that, if we decide to require lot number and 
expiration date information to be encoded, the information should only 
go on shipping cartons and not on individual packages because this 
would reduce the manufacturer's costs.
    The comments also disagreed on how to interpret our recall data. 
The preamble to the proposed rule stated that we had examined the 
number of recalled drugs from fiscal year 1997 through fiscal year 2002 
and that, while there were 1,230 recalls during that time period, there 
were few reports of adverse experiences associated with the 
administration of a recalled drug (see 68 FR 12500 at 12507). One 
comment said this data supported inclusion of lot number and expiration 
date information in the bar code because Class I recalls represent a 
reasonable probability that the use or exposure to the drug will cause 
serious adverse health consequences or death, and 97 of the 1,230 
recalls were Class I recalls. In contrast, a comment that opposed 
inclusion of lot number and expiration date information in the bar code 
said the data were not sufficient to show any public health problem 
resulting from the administration of recalled or expired drugs.
    (Response) The final rule does not require lot number or expiration 
date information to be included in the bar code. As we stated in the 
preamble to the March 2003 proposal, the data available to us do not 
indicate the magnitude of the public health problem associated with 
administering expired or recalled drugs, and we cannot

[[Page 9135]]

quantify the patient safety benefit associated with requiring lot 
number and expiration date information in the bar code (see 68 FR 12500 
at 12507). The potential burden of encoding lot number and expiration 
date information appears to outweigh the potential benefit of encoding 
such information.
    We emphasize that we do not dispute whether encoded lot number and 
expiration date information would be helpful in certain contexts that 
are unrelated to medication errors. We also do not dispute that the 
technology exists to encode such information or that certain firms have 
expressed their intent to encode such information. Nevertheless, while 
we recognize the strong desires expressed by some regarding lot number 
and expiration date information, we must also recognize the potential 
impact on manufacturers, repackers, relabelers, and private label 
distributors if we required them to encode lot number and expiration 
date information. The evidence before us indicates that the costs 
associated with encoding lot number and expiration date information, 
insofar as medication errors are concerned, exceed the benefits, so we 
decline to require such information as part of the bar code.
    We reiterate that we will not prevent or prohibit firms from 
encoding lot number and expiration date information if they wish to do 
so, and we note that some drug manufacturers are encoding or intend to 
encode such information. We also remind hospitals and other potential 
bar code users that lot number and expiration date information may be 
encoded in two-dimensional or other technologies, so if they intend to 
purchase drug products with lot number and expiration date information 
encoded, they should consider carefully their scanning or reading 
equipment purchases (see 68 FR 12500 at 12507).
    (Comment 36) Several comments would require other information to be 
encoded. For example, one comment said we should require the bar code 
to contain information regarding the drug's concentration, amount, and 
route of administration. The comment explained that information on the 
drug's concentration and amount could prevent errors involving 
concentration or overdose. It explained that information regarding the 
drug's route of administration could be helpful because, the comment 
claimed, some drugs are not to be administered intravenously or as 
major nerve anesthetics. Another comment focused on clotting factor 
products and wanted the bar code for these products to contain (among 
other things) the drug's brand name and number of units in a vial. The 
comment recognized that encoding the number of units in a vial might be 
difficult, but said that persons with hemophilia and other bleeding 
disorders often carry vials, but not package boxes that contained the 
vials, with them. It added that the additional information would 
provide better information about the product's efficacy, i.e., whether 
the patient achieved the expected hemostatic response given the units 
administered.
    Several comments asked that we require the bar code to indicate the 
drug's waste disposal status under the Resource Conservation and 
Recovery Act (RCRA). The comments explained that medical personnel 
might not know that a particular drug, when it becomes a waste product, 
is regulated under RCRA. Some comments suggested that the drug's waste 
disposal status could be identified by adding another digit to the NDC 
number. One comment suggested that we coordinate with the Environmental 
Protection Agency to capture a drug's hazardous waste disposal status.
    (Response) We decline to revise the rule as suggested by the 
comments. The NDC number, under a bar code system, is a link to 
information held in a database. For example, assume that the bar code 
contains the drug's NDC number. The scanner reading the bar code would 
transmit the NDC number to a computerized database, and that database 
could be designed to generate information regarding the drug's names, 
dose, concentration, route of administration, waste disposal status, 
etc. In other words, the information sought by the comments could be 
built into a database and does not have to be encoded in the bar code 
itself and does not require changes to the NDC number.
3. Can Information Be Omitted From the Label to Accommodate the Bar 
Code?
    (Comment 37) Several comments suggested that we allow firms to 
exclude certain information from their labels so that they could affix 
a bar code. Some comments sought relief from the labeling requirements 
at Sec.  201.10(i) (21 CFR 201.10(i)); that provision requires drug 
labels to contain the drug's proprietary name, established name (if one 
exists), an identifying lot or control number, and the manufacturer's, 
packer's, labeler's, or distributor's name. One comment suggested 
amending Sec.  201.25(c), regarding the bar code's placement on a 
label, to state that any drug complying with the bar code requirement 
is exempt from Sec.  201.10(i)(1)(iii) and (i)(1)(iv) (provisions 
regarding the identifying lot number or control number and 
manufacturer's, packer's, labeler's, or distributor's name) if the 
packaging size is such that the required information is not easily 
readable.
    One comment sought clarification regarding a label requirement 
imposed by another Federal agency. The comment claimed that the 
Consumer Product Safety Commission (CPSC) has a regulation that 
requires drug products labeled for hospital use only to also bear a 
statement regarding use in households without young children.
    Several comments focused on small labels. One comment stated that 
excluding ``some'' label information would help print high quality bar 
codes; the comment identified the manufacturer's or distributor's name 
and address as information that it would exclude from a label. 
Similarly, another comment would remove the manufacturer's name from 
the label because, the comment explained, the manufacturer's name is on 
the outer package and is part of the NDC number. Another comment stated 
that the only way to create room for a bar code on a small label would 
be to reduce font size, but the resulting print would be difficult to 
read.
    (Response) We decline to amend the rule as suggested by the 
comments. In most cases, the information that the comments would remove 
from the label is required by Federal law, so we are unable to provide 
the relief sought by the comments. For example, section 502(b)(1) of 
the act considers a drug to be misbranded if it is in package form and 
its label does not contain ``the name and place of business of the 
manufacturer, packer, or distributor.'' Section 502(b) of the act does 
not authorize any exemptions from this requirement, so we cannot delete 
such information from the label simply to accommodate a bar code. 
Similarly, section 502(e)(1)(A)(i) of the act considers a drug to be 
misbranded if its label does not bear the drug's established name, so 
we cannot allow firms to exclude the drug's established name from the 
label. Additionally, section 351(a)(1)(B) of the PHS Act requires the 
package of a biological product to be marked with the product's proper 
name, the name, address, and applicable license number of the product's 
manufacturer, and the product's expiration date.
    Furthermore, because the rule does not require lot number and 
expiration date information to be encoded, we decline to allow firms to 
remove the human-readable lot number and expiration date information 
from the label.

[[Page 9136]]

    As for the comment seeking clarification of CPSC requirements, such 
matters are outside the scope of this rule and outside FDA's 
jurisdiction.

D. Does the Rule Require a Specific Type of Bar Code? (Sec.  
201.25(c)(1))

1. Should the Rule Require Linear Bar Codes?
    Proposed Sec.  201.25(c)(1) would require the bar code to be a 
linear bar code that meets EAN/UCC standards. The preamble to the March 
2003 proposal discussed, in some detail, how we decided to propose the 
use of linear bar codes and described the tension between trying to 
create a bar code requirement that would enable hospitals to buy 
scanning equipment with the confidence that their purchased equipment 
would not be rendered obsolete by new technology and trying to create a 
bar code requirement that offered some room for technological 
innovation (see 68 FR 12500 at 12508 through 12510). We also invited 
comment on whether we should consider the use of another symbol, 
standard, or technology, either with or in place of a linear bar code, 
the acceptance of that other symbol, standard, or technology among 
parties that would be subject to the rule, and the ability of hospitals 
to read or use other symbols, standards, or technologies (id. at 12510 
and 12529).
    (Comment 38) Many comments addressed the subject of linear bar 
codes. Several comments indicated the rule should require the use of 
linear bar codes because of their widespread use and because hospitals 
that are currently printing and scanning bar codes might be unable to 
upgrade their technology to support nonlinear technologies. One comment 
stated that our decision to require linear bar codes was ``brilliant'' 
and that our logic was ``impeccable.'' Another comment said that linear 
bar codes could be used as an initial requirement and that technology 
currently installed in most hospitals cannot be upgraded to support 
nonlinear technologies. The comment added that if we required nonlinear 
bar codes, hospitals could face significant costs, and those hospitals 
that had already implemented linear bar code systems would be 
penalized. Another comment said that many applications of currently-
used linear bar code systems are appropriate for suppliers and end 
users. The comment, which was submitted by a supply company for two 
large, not-for-profit hospital alliances, added that it shared our 
concern that ``technologies/standards not be so advanced that hospitals 
are then unable to read and scan the bar codes,'' and it urged us to 
evaluate and promote new and emerging technologies ``only as they 
become more readily available, and easily embraced by end users.''
    Another comment said we should require the bar code to meet certain 
``attributes;'' the comment explained that this would provide some 
flexibility (although it did not explain what the attributes would be 
or what that flexibility was) while still ensuring a minimum standard. 
The comment added that the standard should be one that does not require 
hospitals to spend significant amounts of money to replace scanning 
equipment that would otherwise be acceptable for use. Two comments 
submitted by drug manufacturers expressed a similar opinion, stating 
that we should allow firms to use any linear bar code symbology so that 
firms could pick the symbology that best fits their needs.
    One comment agreed with our proposal to require linear bar codes, 
but asked whether this included multidimensional codes. The comment 
claimed that multidimensional codes are several thinly-stacked linear 
codes. It added that, while older bar code scanners might not be able 
to read multidimensional codes, we should not be concerned about older 
scanners because most hospitals would not have scanners (and therefore 
would not need upgrades) or that hospitals with older scanners could 
upgrade those scanners.
    Most comments, however, argued against the use of linear bar codes 
or asked us to encompass other technologies or to eliminate any 
reference to linear bar codes in the final rule. Many comments claimed 
that the rule would discourage or inhibit technological innovation, 
although they differed as to their preferred alternatives to a linear 
bar code. For example, one comment said laws and regulations should 
encourage technological innovation, but did not explain why our 
particular rule had to do so. Comments opposed to a linear bar code 
requirement generally advocated the following alternatives:
    [sbull] Two-dimensional symbologies, on the grounds that such 
symbologies can be used on small packages, require less space compared 
to linear bar codes, can encode more data than a linear bar code 
(although the comments usually did not explain why more data capacity 
was needed), or can be placed on solid dosage forms themselves. Some 
comments specifically mentioned DataMatrix as a recommended symbology, 
whereas others referred to symbols or systems created or marketed by 
the firm who submitted the comment or to symbols that would be marketed 
in addition to the two-dimensional symbology. Other comments suggested 
using two-dimensional symbologies in conjunction with linear bar codes, 
with the two-dimensional symbology encoding lot number and expiration 
date information.
    [sbull] The EAN/UCC system generally, on the grounds that the EAN/
UCC system is widely used for drug products, has defined data 
structures, is used internationally, and would be less expensive 
compared to a regulatory approach that imposed no standard. However, 
other comments opposed the EAN/UCC system, declaring it to be 
``obsolete,'' or declaring that selecting the EAN/UCC would serve no 
purpose, would violate unspecified Federal laws, or would create a 
``monopoly'' for the UCC. (We discuss comments on the EAN/UCC standard 
and HIBCC standards in more detail in comment 41 of this document.)
    [sbull] Radio frequency identification chips. Some comments 
advocated the use of these chips and claimed that such chips could be 
an alternative to or used with the bar code and can be ``highly 
effective'' at identifying individuals and animals in a cost-effective 
manner. One comment noted that we had mentioned the comparatively high 
costs associated with radio frequency identification chips, but said we 
should not reject the chips on cost grounds alone. It said the 
pharmaceutical industry and health care providers should have the 
flexibility to choose identification techniques that are the most 
suited to a product or clinical setting. The comment added that if we 
required the use of a particular technology, we would create a conflict 
with our GMP principles because our GMP regulations do not require use 
of a particular piece of equipment, and we would be creating a 
disincentive for industry to develop more cost-effective identification 
systems.
    [sbull] No standard or symbology at all. These comments advocated 
the use of ``open'' or ``machine-readable'' requirements so that market 
forces would decide which technologies would be used. One comment added 
that the use of nonlinear codes would make linear bar codes 
technologically obsolete by the time the final rule became effective. 
Another comment said we should require ``automatic identification'' 
instead of bar codes. Another comment suggested that manufacturers, 
repackers, and relabelers be allowed to customize symbols to meet 
customer needs, although the comment did agree that the NDC number 
should be present.

[[Page 9137]]

    Comments were also divided on scanner technology. Most comments 
that addressed scanner technology declared scanner technology to be a 
``non-issue'' because, they claimed, scanners can automatically 
discriminate between linear bar codes and can be reprogrammed or 
updated to read specific codes and even complex codes. One comment 
stated that the adoption rate of two-dimensional image readers is 
increasing and that such readers are becoming popular and less 
expensive. Others declared that high-resolution scanners can read both 
one- and two-dimensional symbologies and predicted that scanner 
manufacturers and suppliers would become very attentive to customer 
needs, so that scanner prices would fall. One comment said we should 
not be concerned about hospital costs at all or not consider such costs 
as limiting the industry's technological options; the comment argued 
that our consumer safety mandate precludes financial considerations, 
and claimed that the OTC drug industry ``rises to the financial 
challenges presented by government regulations.'' The comment noted 
that the rule does not require hospitals to buy scanners, so the 
comment said, ``it seems irrational to tailor these requirements based 
upon what hospitals may or may not do to ensure the safety of their 
patients.''
    In contrast, two comments indicated that technological limitations 
do exist. One comment agreed that scanners can read different 
symbologies, but said that printing technology, particularly with 
respect to variable information (such as lot number and expiration 
date), does not exist for high-speed, online printing. Another comment 
said that technology currently installed in most hospitals cannot be 
upgraded to support nonlinear symbologies; the comment said that if we 
required nonlinear bar codes, hospitals could incur significant costs, 
and those who had adopted bar code systems earlier would be 
``penalized.''
    (Response) The comments reflect the same array of differing 
opinions that we encountered at the public meeting and described in the 
preamble to the March 2003 proposal (see 68 FR 12500 at 12508 and 
12509). As we noted in the preamble to the March 2003 proposal, there 
are two principal, yet contradictory, themes. One theme advocates a 
specific technology or standard to promote uniformity and to create the 
conditions under which hospitals could invest confidently in their bar 
code scanning equipment. The other theme advocates innovation so that 
newer and perhaps better technologies might be adopted easily. Each 
theme has its advantages, disadvantages, and assumptions. For example, 
linear bar codes have the advantage of being a proven, established 
technology that is easily recognized and easily used. They may also be 
less expensive than newer, emerging technologies, and are capable of 
encoding the NDC number. However, linear bar codes have several 
disadvantages, too, as they offer limited opportunity for innovation 
and may take up more label space than newer technologies. They also may 
encode less data compared to other technologies. Thus, if we were to 
require more data to be encoded on the packaging or labeling for any 
other reason (such as to allow tracking and tracing of drug products 
through the drug distribution system), a linear bar code might prove 
too limiting.
    In contrast, a position that advocates innovation, with or without 
identifying a particular technology, has the potential advantages of 
encoding more data in a smaller space and perhaps accommodating new 
technologies as they arise without any additional rulemaking. The 
disadvantages, however, would include the possibilities that new, 
emerging technologies may be unproven, not widely accepted, or present 
unknown risks. For example, current radio frequency identification 
chips may have less reliable read rates than a linear bar code, and we 
do not know whether the equipment needed to detect such chips will 
present EMI issues for other medical devices in the hospital 
environment. As another example, failure to prescribe a specific 
technology might deter hospitals and other potential users from buying 
scanning or reading equipment because there would be no assurance that 
drug manufacturers would use the same or compatible technologies. As 
yet another example, requiring ``automatic identification'' of the NDC 
number could lead some manufacturers to develop their own, exclusive 
identifiers, and individuals might not recognize those identifiers, 
particularly if those identifiers are very small, not widely used, or 
placed under the product's label. Thus, if we were to revise the rule 
to promote innovation, with or without identifying a particular 
technology, hospitals and other potential users might be reluctant to 
purchase scanning or reading equipment, and the rule's benefits would 
not be fully realized.
    After reviewing the comments, we have decided to retain the linear 
bar code requirement, but will consider revising the rule to 
accommodate newer technologies as they become more mature and 
established. Our decision to retain the linear bar code requirement 
rests largely on the following considerations:
    [sbull] Linear bar codes are an established and proven technology. 
They are widely used in many sectors, and we are unaware of any 
significant problems associated with linear bar codes and their 
scanners. In contrast, new technologies, such as the radio frequency 
identification chip, are still being developed or refined, and we do 
not know, at this time, whether or when those new technologies have or 
will have widespread acceptance or become standardized, or whether the 
equipment used to detect or read those new technologies will present 
any safety or regulatory issues. For example, we do not know whether 
the equipment needed to detect radio frequency identification chips 
will present EMI or EMC issues for other devices that are used inside 
hospitals.
    [sbull] Linear bar codes are easily recognized and easily used or 
applied. Most individuals can identify a linear bar code quickly and 
can scan it without much training. For example, various grocery store 
chains have installed ``self-scan'' stations where consumers scan the 
bar codes on their purchases themselves; the consumers are able to do 
this with little or no training. In contrast, two-dimensional 
symbologies come in different shapes and sizes, and they can be smaller 
than linear bar codes. As a result, individuals might not recognize 
two-dimensional symbologies as quickly and might not even recognize 
them as encoding data. If the rule allowed any ``automatic 
identification'' technology, then the risk that individuals might not 
recognize the technology or lack the proper equipment to read that 
technology would increase.
    [sbull] Although most comments opposed the proposed linear bar code 
requirement, they failed to agree on alternative technologies. For 
example, some comments supported two-dimensional codes, particularly 
DataMatrix, but others supported radio frequency identification chips. 
Some comments endorsed products that a specific company had created, 
while others suggested that we simply require ``automatic 
identification'' technology. We believe that if the rule is to result 
in any significant benefits, it must specify a technology so that 
hospitals and other interested parties can purchase the correct 
scanning or reading equipment. We do not agree with the comment that 
claimed it would be ``irrational to tailor these requirements based 
upon what hospitals may or may

[[Page 9138]]

not do.'' The rule's expected benefits are realized only if hospitals 
accept and use bar code technology. Therefore, we consider it prudent 
to consider what hospitals may or may not do when prescribing a 
regulation that is intended to benefit hospitals and their patients.
    We also disagree that the rule prevents or otherwise hinders 
innovation. Automatic identification technologies are useful in other 
contexts, such as retail environments, and are used on many different 
consumer goods. In other words, the fact that the final rule requires 
the use of linear bar codes does not mean that all progress on other 
automatic identification technologies must stop, nor does it mean that 
innovative automatic identification technologies cannot be used on 
other products.
    We recognize that other technologies may be able to encode more 
data in less space compared to linear bar codes. These arguments do not 
address the fact that this rule only requires firms to encode one piece 
of datum (the NDC number). A linear bar code is capable of encoding the 
10-digit NDC number. Furthermore, such arguments do not address the 
principles of regulation that we must observe pursuant to Executive 
Order 12866; under section 1(b)(5), we are to design our regulations 
``in the most cost-effective manner to achieve the regulatory 
objective'' and to consider ``incentives for innovation, consistency, 
predictability, the costs of enforcement and compliance * * * 
flexibility, distributive impacts, and equity.'' Applying that 
principle to this rule, we believe that a linear bar code is the most 
``cost-effective'' device for encoding the NDC number particularly 
when, as the comments suggest, the alternative would be to specify no 
technology at all or encompass technologies whose data encoding 
capacities far exceed the information required. A linear bar code 
requirement offers consistency, predictability, and lower costs of 
enforcement and compliance compared to technologies whose acceptance 
and reliability may be uncertain, or compared to a requirement that 
offered no criteria upon which hospitals could rely.
    We realize that, in October 2003, we issued a report entitled ``FDA 
Counterfeit Drug Task Force Interim Report'' (see Food and Drug 
Administration Press Release, ``FDA Anti-Counterfeiting Task Force 
Interim Report Focuses on High-Tech Weapons and Other New Promising 
Measures,'' dated October 2, 2003). This report discussed, among other 
things, anti-counterfeiting technologies, including ``track and trace 
technologies.'' The final rule does not affect the development or 
adoption of such ``track and trace technologies.'' Moreover, the final 
rule's underlying purpose (prevention of medication errors) is distinct 
from the purposes underlying anti-counterfeiting efforts (preventing 
the introduction of counterfeit drugs, facilitating identification of 
counterfeit drugs, minimizing consumer risk and exposure to counterfeit 
drugs, and avoidance of unnecessary costs on the prescription drug 
system). For example, in the medication error prevention context, the 
goal is to ensure that the right drug, in the right dose and right 
route of administration, is given to the right patient at the right 
time, so requiring a bar code on a unit-dose product is both necessary 
and appropriate, but information regarding the drug's origin (i.e., 
place of manufacture) is not essential. In contrast, for track and 
trace purposes, the goal is to ensure that individual products can be 
followed through the drug distribution system from the point of 
manufacture, but this goal does not necessarily extend down to the 
unit-dose package level.
    Nevertheless, we reiterate that we will consider revising the rule 
to accommodate new technologies. As we explain in more detail in 
section II.I of this document, we expect compliance with the bar code 
requirement within 2 years after the final rule's effective date. At 
that time, we will begin examining other automatic identification 
technologies to determine whether we should amend the rule to allow the 
use of such technologies. We intend to conduct our examination in a 
public and transparent manner, with opportunity for public 
participation and comment. This could be done, for example, through a 
public meeting, a document inviting comment, an advance notice of 
proposed rulemaking, or other public forum. We will decide on the 
appropriate public forum at a future time.
    Regarding the EAN/UCC system, the final rule allows the use of 
either EAN/UCC or HIBCC standards. We discuss the reasons behind this 
change at comment 41 of this document.
    As for the comment concerning multidimensional codes, we note that 
there is disagreement whether certain symbologies are two-dimensional 
or simply a series of thin, one-dimensional codes stacked upon each 
other. Therefore, we cannot say, as a general matter, whether 
multidimensional codes are ``linear bar codes'' within this final rule 
because we cannot be sure that all parties share the same 
interpretation as to what constitutes a multidimensional code. 
Nevertheless, if a firm believes that a particular type of thin, one-
dimensional codes that are stacked upon each other is still a ``linear 
bar code'' and intends to use that stacked code, that stacked code must 
be capable of being read clearly by scanning or reading equipment in 
the same manner as conventional linear bar codes to fall within Sec.  
201.25(c).
    Finally, regarding one comment's claim that a linear bar code 
requirement would create a conflict with our GMP principles and will 
create a disincentive for industry development of other identification 
systems, we disagree. The linear bar code is not a manufacturing 
process; it is instead the visual representation of information. To use 
an analogy, we require labels to use the English language except where 
the article is to be distributed solely in the Commonwealth of Puerto 
Rico or in a U.S. Territory where the predominant language is not 
English (see 21 CFR 201.15(c)(1)). The English word is the visual 
representation of the information. If we had to accept any language on 
product labels (using the comment's GMP theory), then those using the 
product might not understand the information if they did not know the 
language used on the label. Furthermore, as we stated earlier in this 
response, the linear bar code requirement does not prevent anyone from 
developing innovative automatic identification technologies for any 
other industry for any other reason, and we will consider whether to 
accept other automatic identification technologies as they become more 
mature and accepted.
    (Comment 39) One comment claimed it would be ``legally 
indefensible'' for hospitals to not choose two-dimensional systems if 
firms encoded lot number and expiration date information; the same 
comment also declared that some hospitals have their suppliers use two-
dimensional codes so requiring linear bar codes would ``force'' those 
hospitals to ``abandon'' their systems because their suppliers would 
have to convert to linear bar codes.
    (Response) We disagree with the comment. The only required piece of 
encoded data is the NDC number; hospitals are free to decide which 
scanning systems are best for them and are also free to decide whether 
to take advantage of any voluntarily-encoded lot number and expiration 
date information. We reiterate that we were unable to demonstrate that 
the benefits of encoding lot number and expiration date information 
would exceed the costs (see 68 FR 12500 at 12528 and 12529). Therefore, 
we disagree that it would be ``legally indefensible'' for hospitals to 
choose linear bar code scanners that are

[[Page 9139]]

perfectly capable of reading the NDC number contained in a linear bar 
code.
    We also disagree that the final rule ``forces'' hospitals to 
abandon systems that they may have adopted before this rulemaking. If a 
two-dimensional scanning system is capable of reading both one- and 
two-dimensional symbologies, then the system should still be able to 
read the NDC number contained in the one-dimensional, linear bar code. 
We acknowledge, however, that if a hospital had insisted that its 
suppliers use only two-dimensional codes, the final rule's linear bar 
code requirement means that those suppliers must use a linear bar code 
to encode the NDC number. If the supplier wishes, it can encode lot 
number and expiration date information voluntarily using any symbology 
or automatic identification technology, so if the hospital insisted 
that the supplier use two-dimensional symbologies to encode lot number 
and expiration date information, the hospital's two-dimensional 
scanning system would still be useful.
    (Comment 40) One comment asked whether ``linear bar code'' meant to 
include a specific symbology called ``RSS-14 stacked.'' The comment 
explained that RSS-14 stacked ``is essentially the same thing as RSS-
14, except that it is printed in two rows in order to make it narrower 
at the expense of height.'' The comment said that a scanner can easily 
decode an RSS-14 stacked symbol, but added that, ``I hope you get input 
from Scanner manufacturers on this point.''
    (Response) The comment is correct that RSS-14 stacked is a variant 
of the RSS-14 linear bar code and that it consists of two rows of two 
segments each. A ``separator pattern'' is printed between the two rows 
to eliminate cross-row scanning errors.
    We believe that RSS-14 stacked symbology can be read by linear bar 
code scanners, although the scanners would have to be programmed to 
read RSS-14 codes and, depending on the scanner, may require more time 
to read a stacked code. Thus, we would consider RSS-14 stacked to be a 
linear bar code within the rule.
    (Comment 41) Some comments questioned or criticized the proposed 
rule's reference to UCC standards. One comment said that ``standards'' 
refers to the data structure and not to symbologies. The comment asked 
if we meant that the linear bar code had to be one used by the UCC and 
that the NDC number had to be in a UCC data format.
    One comment, submitted by a medical device trade association, 
supported use of either the EAN.UCC or HIBCC standards. The comment 
explained that most medical device manufacturers who are voluntarily 
labeling their products use the UPN system, and the EAN.UCC and HIBCC 
standards comprise the UPN system. HIBCC also recommended that the 
final rule not rely solely on EAN.UCC standards; it acknowledged that 
EAN.UCC standards are ``by far the most prevalent in pharmaceutical 
labeling,'' but suggested that alphanumeric coding (which HIBCC 
standards use) ``allows for literally-encoded information that is 
inherently safer'' (than numeric coding alone).
    HIBCC, as well as another comment, also stated that requiring 
EAN.UCC standards would create a monopolistic environment that might 
inhibit the development and implementation of technologies outside the 
EAN.UCC's purview. The other comment claimed that the UCC is not a 
standards body, has proprietary interests, provides sponsored bar codes 
to members as part of a variable annual fee, and that the linear bar 
codes that would be used on hospital patient identification bands are 
not EAN.UCC codes, so that there would be no benefit in selecting 
EAN.UCC standards. The comment protested that the EAN.UCC standard 
requirement would compel manufacturers to join the UCC even though 
adequate bar codes are available in the public domain, and declared 
that the rule would violate unnamed Federal laws by referring to 
EAN.UCC standards.
    Another comment advocated use of both EAN.UCC and HIBCC standards. 
It suggested that this would encourage the adoption of automatic 
identification technologies as they develop, although the comment also 
recommended that linear bar codes be the initial technological 
requirement so that hospitals that have bar code systems are not 
disadvantaged.
    (Response) Proposed Sec.  201.25(c)(1)'s reference to UCC.EAN 
``standards'' was intended to mean that the linear bar code had to be 
one that the UCC recognized and the data standard had to be in a 
UCC.EAN format (see 68 FR 12500 at 12509).
    However, after considering the comments, we will interpret Sec.  
201.25(c)(1) as meaning that the linear bar code can be in any format, 
and the final rule gives firms the option of using EAN.UCC or HIBCC 
data standards. (We have revised the rule to refer to ``EAN.UCC'' 
standards, rather than ``UCC/EAN'' standards, in order to use the 
commonly-recognized abbreviation.) In other words, the manner in which 
the NDC number is encoded may be in an EAN.UCC or HIBCC format, and the 
manner in which the NDC number is visually presented must be a linear 
bar code. We have decided to give firms the option of using HIBCC data 
formats because HIBCC is a widely-recognized, nonprofit standards 
development organization whose standards, like EAN.UCC standards, are 
accredited by ANSI, and, as the comments suggested, allowing the use of 
either EAN.UCC or HIBCC standards may encourage further development and 
adoption of other automatic identification technologies. We also cannot 
preclude the possibility that some firms may prefer using alphanumeric 
code formats, which HIBCC uses, although we do not express any opinion 
as to whether alphanumeric codes are ``safer'' than numeric ones.
    Allowing the use of HIBCC standards will also prevent the creation 
of the ``monopolistic'' environment that some comments feared. Although 
one comment claimed that the UCC is not a standards organization and 
implied that the UCC will benefit financially if we require bar codes 
to use EAN.UCC standards, our information is that the UCC is a not-for-
profit standards organization.
    We strongly recommend that manufacturers, repackers, relabelers, 
and private label distributors who are subject to the bar code 
requirement carefully consider their linear bar code symbology and 
standard choices. (The EAN.UCC or HIBCC standard may also determine the 
type of linear bar code symbology that is used.) The bar code's ability 
to affect medication error rates depends largely on the ability of 
hospitals to scan and interpret the data in the bar code. So, for 
example, choosing a commonly-used linear bar code symbology in a 
standard that scanners can easily read will have a greater impact on 
patient safety compared to a unique bar code symbology that few (if 
any) scanners are programmed to read.
2. Should the Rule Impose Any Conditions on the Bar Code?
    Proposed Sec.  201.25(c)(1)(i) and (c)(1)(ii) would require the bar 
code to be surrounded by sufficient blank space so that the bar code 
can be scanned correctly and require the bar code to remain intact 
under normal conditions of use. The preamble to the March 2003 proposal 
explained that some manufacturers had placed bar codes at locations 
where the bar codes are destroyed, damaged, or otherwise rendered 
useless (see 68 FR 12500 at 12510), so the proposal was intended to 
help ensure that the bar codes could be read correctly.

[[Page 9140]]

    (Comment 42) One comment asked whether our reference to ``blank 
space'' referred to ``quiet zones'' in a bar code. A ``quiet zone'' in 
a bar code usually refers to a blank space that appears before the 
first bar and after the last bar.
    (Response) Section 201.25(c)(1)(i)'s reference to ``blank space'' 
means that the linear bar code must be surrounded, on all four sides, 
by an area where no print occurs. This is slightly different from the 
``quiet zone'' in a bar code because Sec.  201.25(c)(1)(i)'s ``blank 
space'' would include areas that are above and below the bars.
    We note, however, that we have previously indicated that we would 
not object if firms voluntarily encoded lot number and expiration date 
information (see 68 FR 12500 at 12508) and that such voluntarily-
encoded information might appear in another machine-readable format 
with the linear bar code. For example, a firm might decide to use a 
composite code, where the NDC number is encoded in a linear bar code 
and the lot number and expiration date information is encoded in a two-
dimensional code, with the two-dimensional component placed immediately 
above the linear bar code. If a firm elects to encode lot number and 
expiration date information voluntarily, and the voluntarily-encoded 
information is immediately adjacent to the required linear bar code, we 
will interpret the ``blank space'' requirement as applying to the 
entire composite code. In other words, we would not interpret the 
``blank space'' requirement as preventing firms from using composite 
codes.
    (Comment 43) One comment disagreed with proposed Sec.  
201.25(c)(1)(ii) insofar as it would require the bar code to remain 
intact under normal conditions of use. The comment said manufacturers 
should be allowed to print bar codes across perforations on blister 
packs as long as this did not affect the ability of the bar code to be 
scanned correctly. The comment said that printing the bar code across 
perforations would leave more space on the drug's label for other 
required information.
    In contrast, another comment, submitted by a hospital, stated that 
the hospital's use of manufacturers' bar codes suggests that those 
codes sometimes fail to maintain their integrity. The comment said that 
linear lines become jagged, the markings degrade on the medium on which 
they are placed, or the bar code is placed in such a manner that it 
becomes unusable at the unit-dose level. The comment added that ``it 
has been our experience that the bar code does not always agree with 
the written description of the product,'' and it said that we should 
continue to require the bar code to remain intact under normal 
conditions of use, particularly with respect to unit-dose packages.
    (Response) Section 201.25(c)(1)(ii) requires the bar code to remain 
intact under normal conditions of use. Our fundamental goal is to 
reduce or prevent medication errors, and that goal is best served when 
the bar code remains intact under normal conditions of use. As we 
stated in the preamble to the March 2003 proposal, partial or 
incomplete bar codes can provide misleading information or not be read 
at all by scanners (see 68 FR 12500 at 12510); these potential problems 
are avoided if the bar code remains intact under normal conditions of 
use.
    We realize that label space can be limited due to other information 
that our statutes or regulations require to be on a drug's label, but 
there may be alternatives to printing the bar code across perforations. 
For example, the final rule does not require the bar code to appear on 
the same surface as other label information. Likewise, the final rule 
does not prevent a manufacturer, repacker, relabeler, or private label 
distributor from revising its packaging to accommodate more label 
information. Thus, there may be other approaches that would ensure that 
the bar code remains intact under normal conditions of use.

E. Where Does the Bar Code Go? (Sec.  201.25(c)(2))

    Proposed Sec.  201.25(c)(2) would have the bar code appear on the 
drug's label as defined by section 201(k) of the act. The preamble to 
the March 2003 proposal explained that section 201(k) of the act 
defines ``label'' as:
    a display of written, printed, or graphic matter upon the 
immediate container of any article; and a requirement made by or 
under authority of this Act that any word, statement, or other 
information appear on the label shall not be considered to be 
complied with unless such word, statement, or other information also 
appears on the outside container or wrapper, if any there be, of the 
retail package of such article, or is easily legible through the 
outside container or wrapper.
Thus, by proposing to require the bar code to be on the drug's label, 
proposed Sec.  201.25(c)(2) would result in bar codes on the drug's 
immediate container label as well as the outside container or wrapper, 
unless the bar code is easily legible and machine-readable through the 
outside container or wrapper (see 68 FR 12500 at 12511).
    (Comment 44) One comment asked that we require the bar code to ``be 
oriented on the label in such a way as to promote visual reading of the 
drug, strength, etc. while scanning the bar code.'' The comment 
explained that positioning the bar code in any other way would make 
users dependent on the scanning process instead of reading the drug's 
label. The comment said the only exception to its suggested placement 
restriction should be when the label does not support the bar code 
format, ``with the burden on the manufacturer to justify the decision 
not to orient the label contents in this fashion.''
    (Response) We decline to revise the rule as suggested by the 
comment. By not specifying how or where the bar code must appear, the 
rule gives firms considerable flexibility in designing their labels to 
include the bar code and any other information required by law or FDA 
regulations.
    Although we recognize the comment's concern about relying too much 
on technology, we disagree with the comment's assumption that users 
will become dependent on the bar code and will stop reading drug 
labels. The human-readable information on a drug's label goes far 
beyond the drug's NDC number. For example, under Sec.  201.100(d)(1), a 
drug's labeling, whether or not it is on or within a package from which 
the drug is to be dispensed, must contain adequate information for the 
drug's use, including any relevant warnings, hazards, 
contraindications, side effects, and precautions; the drug's NDC number 
will not provide such information. As another example, section 
502(b)(1) of the act declares a drug to be misbranded if its label does 
not contain the name and place of business of the manufacturer, packer, 
or distributor, while section 502(e)(1)(A) declares a product to be 
misbranded if its label does not contain the drug's established name, 
quantity or proportion of each active ingredient. In short, the bar 
code, and the NDC number contained in the bar code, act more as a link 
between the drug, the patient, and the patient's drug regimen and do 
not act as a surrogate for the drug's label.
    (Comment 45) One comment focused on products that are individually 
packaged in a tray or pouch and are considered sterile within the tray 
or pouch. The comment said we should allow the bar code to be placed on 
the tray or pouch because the drug is supposed to remain sterile and 
not be removed from the tray or pouch until the time the drug is 
administered.
    (Response) We decline to revise the rule as suggested by the 
comment. By requiring the bar code to appear on the

[[Page 9141]]

product's ``label,'' Sec.  201.25(c)(2) should result in a bar code on 
the immediate container label and the outer wrapper label. We are aware 
that, despite labeling instructions to the contrary, individuals might 
remove the outer wrapper and administer the drug product at a later 
time. Therefore, a bar code on the immediate container label may help 
prevent product mixups and medication errors that may occur when the 
drug product is removed from the outer wrapper and not used 
immediately.
    As for the comment's drug sterility concern, we are not aware of 
any reason why including a bar code on the immediate container label as 
well as on the outer wrapper would adversely impact drug product 
sterility.
    (Comment 46) Some comments focused on drug packaging. Some comments 
asked us to require bar codes on every unit-of-use package so that 
hospitals do not need to repack drugs. Several comments said we should 
require single dose packaging to make bar coding easier and accurate 
dosages more feasible. A different comment said that we should require 
manufacturers to have unit-dose packaging before they can market a 
drug. Other comments expressed concern that a bar code requirement 
might lead manufacturers to stop unit-dose or unit-of-use packaging or 
insisted that manufacturers use such packaging. Another comment asked 
us to require bar codes on ``all packaging'' as soon as possible, but a 
different comment agreed that we should require bar codes on unit-dose 
packages.
    (Response) Regarding unit-of-use packages, the rule does require 
bar codes on such packages because Sec.  201.25(c)(2) states that the 
bar code must appear on the drug's label. Section 201(k) of the act 
defines ``label,'' in part, as ``a display of written, printed, or 
graphic matter upon the immediate container of any article.'' Thus, 
because a unit-of-use package would be the immediate container for a 
drug, the unit-of-use package must bear a label and, under Sec.  
201.25(c)(2), have a bar code.
    We decline to require manufacturers to use unit-dose or unit-of-use 
packaging. We recognize that concerns may exist over the rule's impact 
on such packaging, and we even raised the issue ourselves in our public 
meeting (see 67 FR 41360 at 41361). However, as we noted in the 
preamble to the March 2003 proposal, our industry contacts suggest that 
the costs associated with a bar code requirement ``would not be great 
enough to significantly impact the market'' and that ``the expected 
reduction in hospital over-packaging could increase market demand for 
unit-dose products despite the cost difference'' (see 68 FR 12500 at 
12526). In other words, our industry contacts suggest that unit-of-use 
or unit-dose packaging decisions depend more on market demand than on 
bar code costs.
    We also decline to require bar codes on ``all packaging.'' The 
preamble to the March 2003 proposal explained that requiring every 
package to bear a bar code would result in too many packages being bar 
coded regardless of the potential impact--or absence of impact--on 
medication errors. For example, we explained that requiring bar codes 
on every package would mean that a shipping container would have a bar 
code, yet no hospital would dispense a drug directly from a shipping 
container to a patient (see 68 FR 12500 at 12511). We maintain that 
requiring bar codes on all packages would not be helpful insofar as 
medication errors are concerned.
    (Comment 47) One comment said that medicated creams and ointments 
can now be reduced from multidose tubes to single dose units and that 
some drugs have specific dosage requirements that further support the 
use of single dose packaging to mitigate dosing errors. The comment 
asked what is being done to convert packaging of semi-solids into ``the 
needed single dose units.''
    (Response) Issues regarding the production of unit-dose packaging, 
regardless of whether the drug is a liquid, cream, or solid, are 
outside the scope of this rule.
    (Comment 48) One comment discussed how bar codes can be imprinted 
on pills. It described a system that uses images of the drug on 
medication schedules, prints bar codes on the drugs themselves, and 
uses two-dimensional bar codes with a ``human recognizable icon or 
symbol'' that identifies the ``general type of pill.''
    Another comment said we should consider technologies that allow 
one- or two-dimensional bar codes to be printed on color film coated 
tablets and other solid oral dosage forms. It added that covert marking 
systems could also be used to address drug counterfeiting concerns, and 
printing codes on the drugs themselves could reduce unit-dose packaging 
requirements.
    (Response) We decline to allow the bar codes to be printed on 
tablets and other solid oral dosage forms. As we stated in our response 
to comment 3 in section II.B.1 of this document, 21 CFR part 206 
requires imprinting on solid oral dosage forms. The imprint was 
designed to help identify solid oral dosage forms, particularly in 
emergency situations, and to help consumers and health care 
professionals identify drugs (see 58 FR 47948; 21 CFR part 206). If we 
allowed the bar code to be imprinted directly on a pill, the bar code 
might interfere with that drug's imprint and could force health care 
professionals and hospitals to consult two different databases (one on 
drug imprint codes and another on bar codes) to determine which drug 
they had before them.
    Imprinting a bar code on a drug may also raise drug stability 
issues or affect a drug's dissolution rate. Imprinting bar codes on 
tablets has other practical limitations; for example, the same 
imprinting approach cannot be used for drugs that are in liquid, 
gaseous, or semi-solid form.
    As for covert marking systems and counterfeiting concerns, such 
matters are outside the scope of this rule.

F. Must Blood and Blood Components Bear ``Machine-Readable'' 
Information? (Sec.  606.121(c)(13))

    Current FDA regulations, at 21 CFR 606.121(c)(13), state that the 
container label for blood and blood components ``may bear encoded 
information in the form of machine-readable symbols approved for use by 
the Director, Center for Biologics Evaluation and Research.'' The 
proposed rule would amend Sec.  606.121(c)(13) to require the use of 
``machine-readable information'' in a format approved by the Director 
of the Center for Biologics Evaluation and Research (CBER) (the CBER 
Director). The CBER Director would review the machine-readable 
information technology to ensure that the minimum requirements are met 
regarding the accuracy of the required labeling information, spacing, 
and conditions of use.
    Proposed Sec.  606.121(c)(13) also would:
    [sbull] Explain that all blood establishments that manufacture, 
process, repackage, or relabel blood or blood components intended for 
transfusion and regulated under the act or the PHS Act are subject to 
the machine-readable information requirement;
    [sbull] State that blood and blood components intended for 
transfusion are subject to the machine-readable information 
requirement;
    [sbull] Describe the minimum contents of the machine-readable 
information as a unique facility identifier, lot number relating to the 
donor, product code, and the donor's ABO blood group and Rh type;
    [sbull] Specify that the machine-readable information must be 
unique to the blood or blood component, be surrounded by sufficient 
blank space so that the

[[Page 9142]]

machine-readable information can be read correctly, and remain intact 
under normal conditions of use; and
    [sbull] State that the machine-readable information must appear on 
the label of the blood or blood component which is or can be transfused 
to a patient or from which the blood or blood component can be taken 
and transfused to a patient.
    The proposal would not specify where the machine-readable 
information must appear on the label. As the preamble to the proposed 
rule explained, unlike the situation for other drugs, there is already 
substantial use of bar codes, notably ABC Codabar and ISBT 128, for 
blood and blood components (see 68 FR 12500 at 12512).
    The preamble to the proposed rule invited comment on whether we 
should specify the use of ABC Codabar, ISBT 128, a different symbology 
or standard, or simply require the use of ``machine-readable 
information'' approved by the CBER Director (id.). We also invited 
comment on whether a ``machine-readable information'' approach was 
feasible or whether we should require the use of EAN.UCC standards for 
blood and blood components.
    (Comment 49) Many comments urged us to require the use of ISBT 128 
rather than ``machine-readable information.'' The comments referred to 
ISBT 128's international acceptance, ``negligible'' licensing and 
registration costs, superiority to Codabar, and acceptance by FDA, 
community blood centers, hospital blood banks, and other parties. Some 
comments pointed out that ISBT 128 is a data standard rather than a 
specific bar code; thus, to these comments, requiring ISBT 128 would 
cover newer machine-readable technologies, including two-dimensional 
symbols and radio frequency identification chips. One comment said that 
a failure to require ISBT 128 would hinder software development because 
software could use the identifiers and check digits in ISBT 128.
    Other comments opposed requiring the use of ISBT 128 or suggested a 
different standard. One comment said that requiring ISBT 128 would 
force FDA to engage in new rulemaking if we decided that a new 
technology should be adopted. The comment did state, however, that if a 
single standard must be developed, it would support ISBT 128. Another 
comment, submitted by the UCC, said that EAN.UCC standards are used in 
commercial packages for shipping and receiving blood products; the 
comment said that if the blood products community requested it, the UCC 
would support creating bar code guidelines for blood products based on 
the EAN.UCC system. The comment added that Japan uses the EAN.UCC 
system for its blood components. Similarly, another comment said that 
the bar codes for blood components should be the same as those used on 
prescription and OTC drug products because pharmacies distribute blood 
components and nurses administer them.
    (Response) The final rule retains the ``machine-readable 
information'' language with a clarification that the format, and not 
the actual information, must be approved by the CBER Director. This 
will enable Sec.  606.121(c)(13) to accommodate changes in machine-
readable technologies. For example, FDA recognized the use of Codabar 
(a specific bar code symbology) in 1985, and, in 2000, accepted the use 
of ISBT 128, version 1.2.0. More importantly, unlike the situation for 
other prescription drugs, there is already substantial consensus on the 
use of machine-readable symbols on blood and blood component labels. If 
we were to amend the rule to require the use of ISBT 128, we would 
ensure a uniform bar coding standard for blood and blood components and 
be consistent with the existing international standard, but we would 
also have to engage in new rulemaking if the international consensus 
standard changed to adopt a new symbology, standard, or technology. We 
believe that relying on an international consensus standard and 
requiring ``machine-readable'' information in a format approved by the 
CBER Director allows us to maintain uniformity in the symbologies or 
technologies used and accommodate new technologies in the future. We 
will announce, through guidance documents, our thinking and 
recommendations about acceptable technologies. In deciding whether a 
particular technology is acceptable for blood and blood component 
container labels, we will review the technology to ensure that the 
minimum requirements are met regarding the accuracy of the required 
labeling information, spacing, and conditions of use. We anticipate 
that the blood industry will standardize encoded machine-readable 
information and reading equipment, using our guidances to minimize, to 
the greatest extent possible, the need for ``country-specific'' 
software and the high cost associated with software development and 
maintenance.
    We also decline to require the use of EAN.UCC standards on blood 
and blood component container labels. The blood industry currently uses 
a machine-readable code that does not meet EAN.UCC standards. If an 
EAN.UCC standard were implemented, it would require an overhaul of the 
United States blood industry and the international blood industry 
(because the resulting standard would depart from ISBT 128). We believe 
such an impact to be unnecessary given our understanding that bar code 
scanners can be programmed to recognize different symbologies.
    Additionally, on our own initiative, we have revised Sec.  
606.121(c)(13)(i) to replace the word ``repackage'' with ''repack.'' 
``Repack'' is the preferred term to describe the act of putting a 
product into a different container.
    (Comment 50) One comment said that the type of bar code was not as 
important as the underlying information contained in the code. The 
comment wanted to be able to track lot or donation numbers, the 
manufacturer's license number, country code, information about the 
blood group, product type, any modifications or special information, 
and dosage.
    (Response) Section 606.121(c)(13)(iii) requires the machine-
readable information for blood and blood components to contain, at a 
minimum,
    [sbull] A unique facility identifier;
    [sbull] lot number relating to the donor;
    [sbull] product code; and
    [sbull] ABO and Rh of the donor.
    Thus, some information sought by the comment would already be 
required. Other pieces of information are also covered under ISBT 128. 
For example, ISBT 128 contains a ``donation identification number;'' 
this number can identify the country/collection facility, the year the 
donation was made, and a serial number associated with the donation. 
ISBT 128 also has an optional ``special testing'' field to convey the 
results of special or additional testing.
    Although the comment also mentioned ``dosage'' information, dosage 
is not normally an issue for blood and blood components, so we decline 
to require dosage information as part of the machine-readable 
information for blood and blood components.
    (Comment 51) The preamble to the proposed rule asked how the rule 
might affect hospitals where patients receive blood or blood 
components, particularly with respect to a hospital's decision to 
purchase a machine reader for blood and blood component codes and the 
linear bar codes on drugs and certain OTC drug products (see 68 FR 
12500 at 12529).
    We received several different opinions on this subject. One comment 
said that if hospitals had to change their blood and blood component 
coding systems to use EAN.UCC standards, it

[[Page 9143]]

would take ``years'' to develop data structures, change transfusion 
software, and implement the changes, and this would be a setback for 
industry standardization. In contrast, another comment, submitted by 
the UCC, said there would be little or no effect on hospitals because 
scanners can read multiple codes, and so use of the EAN.UCC system on 
all products would simplify software development and maintenance. It 
added that we should examine the cost of maintaining two standards 
(EAN.UCC and ISBT 128) within the global marketplace and any potential 
disruption if ISBT 128 were abandoned in favor of the EAN.UCC system.
    Three comments said that ISBT 128 could be easily compatible with 
any bar code system. The comments said that software systems developed 
for blood centers and many hospital blood banks are already ``ISBT 128 
ready.''
    (Response) As we stated in our response to comment 49 in section 
II. F of this document, we decline to require the use of EAN.UCC 
standards on blood and blood component container labels. We agree with 
those comments stating that bar code scanners can be programmed to 
recognize ISBT 128 in addition to other symbologies, and requiring the 
blood industry to convert to EAN.UCC standards would affect efforts to 
adopt uniform standards within the United States and the international 
blood industry.
    (Comment 52) One comment asked if ``blood component`` included 
intravenous immune globulin (IGIV) and albumin. The comment felt that 
ISBT 128 and the data that would be encoded for blood components are 
inappropriate for IGIV and albumin. The comment added that IGIV and 
albumin are distributed by pharmacies and administered by nurses, so 
they should be treated like other drugs.
    (Response) IGIV and albumin are therapeutic products that would be 
subject to the bar code requirement for drug products through Sec.  
610.67. In other words, IGIV and albumin are not subject to the bar 
code requirements for blood and blood components, but they are subject 
to the bar code requirements for drug products.
    (Comment 53) One comment asked us to clarify whether source plasma 
used to manufacture plasma-derived therapies is subject to a bar code 
requirement. The comment said that Source Plasma, when not intended for 
use as a final dosage product, should not be subject to the bar code 
requirement.
    (Response) Source Plasma is not subject to the bar code 
requirements. As stated in Sec.  606.121(a), the container label 
requirements for blood and blood components are not applicable to 
Source Plasma. The machine-readable requirements apply only to blood 
and blood components intended for transfusion (see Sec.  
606.121(c)(13)). Because Source Plasma is intended as source material 
for further manufacturing use (see Sec.  640.60 (21 CFR 640.60)) and is 
not intended for transfusion, Source Plasma does not fall within the 
bar code requirement.
    (Comment 54) Two comments suggested that we require bar codes on 
certain medical devices such as blood bags, filters, and apheresis 
kits.
    (Response) We decline to adopt the comments' suggestion. As we 
stated in our response to comment 29 above, medical devices present 
different regulatory issues and challenges compared to drugs, and, 
unlike drugs, medical devices do not have a unique, reliable 
identifying number. Consequently, we continue to omit medical devices 
from the final rule.

G. Must Biological Products Have a Bar Code? (Sec.  610.67)

    The proposed rule would require biological products (other than 
devices, blood, and blood components intended for transfusion) to 
comply with the bar code requirements at Sec.  201.25.
    We received no comments that were specific to Sec.  610.67. 
However, on our own initiative, we have revised Sec.  610.67 to clarify 
that the bar code requirement at Sec.  201.25 does not apply to devices 
that are regulated by CBER (such as devices that are the subject to the 
biologics licensing application (BLA), premarket approval (PMA) 
application, or 510(k) requirements), or to blood and blood components 
intended for transfusion. As we explained in section II.B.5 of this 
document, devices are exempt from the bar code requirements, whereas 
blood and blood components intended for transfusion are subject to the 
``machine-readable'' information requirements at Sec.  606.121(c)(13).

H. What Other Comments Did We Receive?

    Many comments were not directed at any particular provision but 
instead asked procedural questions (such as how bar code information 
should be reported to us), asked us to create more documents 
(particularly with respect to bar code quality), or discussed whether 
we should keep these regulations in effect after bar coding, for 
medication error purposes, became widespread. We discuss these comments 
in this section.
1. Comments Seeking More Action by FDA
    (Comment 55) The preamble to the proposed rule stated that firms 
whose drug products are already approved or marketed could notify us 
about the addition of a bar code to their product labels through an 
annual report (see 68 FR 12500 at 12512).
    One comment disagreed, stating that we should apply standard 
reporting requirements for such label changes. It said that annual 
reports are not sufficient to provide the maximum benefit to those 
using the bar codes. It suggested that certain third-party databases 
might be able to create new data fields that provide information on 
drugs and drug packaging on a ``very frequent'' basis.
    (Response) The comment misunderstood our position. When we referred 
to the annual report, we meant that firms whose drug products have 
already been approved would simply notify us that they had added a bar 
code to their package labels; that notification to FDA could occur on 
an annual basis. Annual reports are commonly used to report minor label 
changes to us.
    As for transferring information regarding NDC numbers to databases 
(which bar code scanners and hospital computers might consult in order 
to decipher the bar code), we routinely make such information 
available. Moreover, as we stated in the preamble to the proposed rule, 
we are collaborating with the National Library of Medicine and the 
Department of Veterans Affairs to create a collection of up-to-date, 
computer-readable electronic labels for marketed drug products (see 68 
FR 12500 at 12511). This collaboration contemplates daily updates of 
information and, as a result, constant updates of new NDC numbers.
    In short, we intend to make NDC number information available to 
databases constantly. We do not intend to release NDC number 
information only once per year.
    (Comment 56) Several comments asked us to draft additional 
documents. For example, one comment said we should issue a guidance 
document to instruct hospitals and others to use the same bar coding 
methods and principles that manufacturers use if hospitals and other 
entities decide to bar code or to repack drugs. Another comment 
suggested that we should issue a guidance document advising firms on 
how to encode lot number and expiration date information if they choose 
to do so voluntarily.
    (Response) We decline to create the guidance documents that the 
comments

[[Page 9144]]

sought. In general, hospitals are exempt from the bar code 
requirements, and so we believe that our resources are better spent 
developing regulatory materials, when appropriate, for regulated 
entities. Additionally, we lack sufficient expertise to advise 
interested parties on bar coding methods and equipment, but we believe 
there are sufficient documents and standards issued by third parties 
such that, at this time, we do not need to generate such documents or 
standards ourselves.
    (Comment 57) One comment asked us to provide expedited review of 
pre-market submissions for blood establishment computer software. The 
comment said that software users must validate software upgrades before 
such improvements are applied to patient care, but said that validation 
would require extensive time.
    (Response) We decline, in this rulemaking, to provide for expedited 
review of premarket submissions for blood establishment computer 
software. The current rulemaking is aimed at describing the bar coding 
requirements for drugs and similar ``machine-readable'' information 
requirements for blood and blood components. In the absence of any 
submissions, it would be both premature and beyond the scope of the 
current effort to address requests for expedited PMA reviews for blood 
establishment software. However, in this regard, we have made available 
a ``Reviewer Guidance for a Premarket Notification Submission for Blood 
Establishment Computer Software'' on January 13, 1997, and comments on 
FDA guidance may be submitted at any time to the contact listed in that 
guidance.
    (Comment 58) One comment asked us to create an expedited submission 
category for packaging changes that would be needed to comply with a 
bar code requirement. The comment predicted that many firms would 
submit supplemental applications to us so that we might approve 
packaging changes, and the comment predicted that a large number of 
supplemental applications would prevent us from approving packaging 
changes quickly.
    (Response) We decline to adopt the comment's suggestion. We 
interpret the comment as suggesting that we may need to expedite review 
of supplemental applications regarding packaging changes and that the 
comment's use of the word, ``expedited,'' means that we should take 
such supplemental applications out of the normal review process and 
review them first, regardless of the order in which they arrived 
relative to other types of applications.
    We do not believe that expedited review will be necessary for 
several reasons. First, most packaging changes that would be done to 
accommodate a bar code should not require prior FDA approval. Packaging 
changes can be reported to us in various ways, through a supplement of 
changes being effected (see 21 CFR 314.70(c)), a supplement of changes 
being effected in 30 days (see Sec.  314.70(g)(2)), and an annual 
report (see Sec.  314.70(g)(3)); none of these supplements or reports 
require prior FDA approval.
    Second, for drugs that have already received FDA approval by the 
time of the final rule's effective date, we are giving such drugs 2 
years to comply with the bar code requirement. If a firm believes that 
its packaging change is of a type that needs prior FDA approval, this 
2-year period should give the firm and FDA sufficient time to prepare 
and review the supplement.
    If a firm still believes that it needs expedited review of a 
packaging change, we would consider such requests under our existing 
regulations and procedures (see Sec.  314.70(b); Center for Drug 
Evaluation and Research, ``Requests for Expedited Review of Supplements 
to Approved ANDA's and AADA's,'' Manual of Policies and Procedures 
(MAPP) 5240.1 (dated November 1, 1995)); Center for Drug Evaluation and 
Research, ``Requests for Expedited Review of NDA Chemistry 
Supplements,'' MAPP 5310.3 (dated June 11, 1999)). Under Sec.  
314.70(b), applicants may ask for expedited review of a supplement if a 
delay in making the change would impose an ``extraordinary hardship'' 
on the applicant, and we consider expedited review requests on a case-
by-case basis and undertake such expedited reviews if adequate review 
resources are available.
    For packaging changes involving a biological product, see 21 CFR 
601.12 and 314.70.
2. Comments Relating to Bar Code Problems or Quality
    (Comment 59) One comment asked how people might report bar coding 
and scanning errors.
    (Response) As we stated in the preamble to the proposed rule (see 
68 FR 12500 at 12510), the bar code would be part of the drug's label, 
so errors in applying the bar code to the label should be handled like 
any other packaging or labeling operation problem under GMPs (see 21 
CFR 211.122, 211.125, 211.130, 211.180, and 211.184)).
    If an individual encounters a problem scanning the bar code, and 
the problem is due to the bar code's quality, then such scanning 
problems can be reported to FDA through the Drug Quality Reporting 
System. The Drug Quality Reporting System encourages health care 
professionals to voluntarily report observed or suspected defects or 
quality problems with marketed drug products. The agency receives 
reports through the MedWatch Program.
    For biological products, manufacturers can report scanning problems 
as biological product deviations under existing reporting procedures 
(see 21 CFR 600.14 and 606.171).
    (Comment 60) Some comments asked us to audit or monitor bar code 
quality. One comment said we should require the bar code to maintain a 
passing grade of C or better to ensure its quality.
    (Response) As we noted in the preamble to the proposed rule, 
various bar code standards exist, as do standard procedures for bar 
code verification (see 68 FR 12500 at 12510-12511). Given these 
standards and other documents, as well as the comparatively greater 
expertise of standards organizations such as the American Society for 
Testing and Materials and the International Organization for 
Standardization, we do not intend to audit or monitor bar code quality 
aggressively. We also believe that our GMP requirements and the Drug 
Quality Reporting System provide additional safeguards to ensure bar 
code quality.
3. Comments Regarding FDA's Future Involvement With Bar Codes
    (Comment 61) Two comments discussed our future involvement with a 
bar code requirement. One comment said that if the rule referred to 
EAN.UCC standards, without specifying the use of linear bar codes, we 
would not need an ``exit strategy'' to allow for future technologies 
and innovation.
    In contrast, another comment said that the proposed rule had gained 
the pharmaceutical industry's attention and that there is 
``considerable momentum'' towards putting bar codes on drugs. The 
comment said this voluntary effort would continue even if we did not 
issue a final rule and said that the market would decide which 
automatic identifiers meet health care needs so that we no longer had 
to be involved. The comment said our continued involvement in this area 
would not be ``efficient;'' it said we could monitor progress towards 
the use of automatic identifiers, but should not manage it. It also 
suggested that we include a ``sunset'' date in the final rule because 
it claimed the rule created ``enormous uncertainty'' for hospitals 
because the rule permitted inclusion of other

[[Page 9145]]

information in other formats. Thus, if a ``sunset`` date existed, 
manufacturers would be able to use any one- or two-dimensional code 
after that date, and this would give all parties ``a fair opportunity 
to invest in the technology that will meet the future needs of their 
institutions.''
    (Response) As we stated earlier in our response to comment 38 in 
section II.D.1 of this document, we intend to revisit technological 
issues in the future, but we believe that linear bar codes, as an 
initial requirement, will help prevent or reduce medication errors.
    We agree, in part, with the comment that suggested that market 
forces could reduce the need for continued FDA involvement. We note 
that, for blood and blood components, interested parties have been able 
to agree on domestic and international standards for encoding certain 
information. For example, ABC Codabar is a bar coding system that the 
health care industry adopted for blood and blood components and is 
still commonly used in the United States. ISBT 128 is the product of a 
consensus conference held by the International Council for Commonality 
in Blood Bank Automation and is now preferred over ABC Codabar. The use 
and acceptance of ABC Codabar and ISBT 128 demonstrates that interested 
parties can agree on specific data standards and formats and, more 
importantly, use those standards and formats.
    Unfortunately, as the comments to the July 26, 2002, public meeting 
and the proposed rule demonstrate, consensus is either absent or, at 
best, is still developing when it comes to bar codes or automatic 
identifiers for drugs. We continue to encourage manufacturers, 
repackers, relabelers, private label distributors, hospitals, scanning 
or reading equipment manufacturers, and other interested parties to 
explore avenues for greater cooperation and consensus. We believe that 
all parties may benefit by reducing medication errors through the use 
of bar codes or other automatic identification technologies. For 
example, manufacturers and hospitals may see fewer medication errors 
and, as a result, reduced liability. Patient safety would be enhanced 
as patients would experience fewer medication errors. Scanning or 
reading equipment manufacturers would benefit by knowing how to develop 
or program their equipment more effectively and efficiently (based on 
the bar codes or identifiers used by manufacturers and accepted by 
hospitals). Parties could also agree to encode information that we do 
not require as part of the bar code, such as lot number and expiration 
date information, and could agree on the automatic identifier(s) for 
encoding that information and the equipment for reading or interpreting 
the encoded information. If parties could develop consensus mechanisms 
that enjoy widespread or unanimous support among those who would apply, 
use, and develop automatic identification technologies, then we could 
possibly reduce our involvement.
    We disagree, however, with the comment's claim that the rule 
creates ``enormous uncertainty'' for hospitals. The linear bar code 
establishes a minimum, technological ``floor'' that hospitals will be 
able to rely upon when deciding on equipment purchases. Although the 
comment is correct that we will not object if firms encode lot number 
and expiration date information voluntarily, we reiterate that the 
inclusion of such information is voluntary, and so we will not dictate 
how such voluntarily-provided information is presented. Moreover, 
creating a ``sunset'' date as the comment suggested could increase the 
possibility that hospitals will not invest in equipment until the 
sunset date is reached. Hospitals might decide to defer their 
investments because, when the sunset date arrives, drug manufacturers 
could decide to switch to two-dimensional symbologies, thereby making 
one-dimensional scanners either obsolete or in need of upgrades. So, 
under a ``sunset'' scenario, hospitals could decide to wait until after 
the sunset date to see whether manufacturers, repackers, relabelers, 
and private label distributors agree on a particular technology, and 
this would reduce the rule's benefits.
    (Comment 62) One comment said we should review the bar code 
requirements on a regular basis to determine whether they are 
preventing or reducing medication errors.
    (Response) We intend to monitor medication error reports and 
published literature to assess the rule's impact on medication error 
rates. As more drugs are bar coded and as more hospitals become capable 
of scanning and interpreting those bar codes, we will be interested to 
hear from hospitals about their experiences using bar coded drugs and 
the impact on medication errors.
4. Miscellaneous Comments
    (Comment 63) One comment said that scanning devices must be 
ergonomically designed and the labels must be small enough to fit on 
drug products. The comment added that scanners must be able to read 
labels that are on curved surfaces.
    (Response) Issues concerning scanner design and capability are 
outside the scope of this rule. Given the abundance and variety of 
scanners (i.e., whether the scanner is ``tethered'' to another device 
or ``wireless'' or whether the scanner is ``heavy duty'' to withstand 
impact in case it is dropped), we believe that hospitals should be free 
to choose the scanners or reading equipment that is best suited to 
their needs.
    Similarly, issues concerning label size are outside the scope of 
this rule.
    However, with respect to reading bar codes on drug labels, the bar 
code's ``readability'' would be subject to GMPs, and, under 21 CFR 
211.122, any labeling material (which would include the product label) 
that does not meet appropriate written specifications ``shall be 
rejected to prevent their use in operations for which they are 
unsuitable.''
    (Comment 64) One comment said that the rule could advance other 
public health objectives or issues, such as product traceability, 
authentication, counterfeiting, and terrorism. It said we should not 
ignore such issues during the rulemaking process.
    (Response) We know that various public health initiatives might 
benefit from technological solutions. However, consideration of other 
public health initiatives should occur in a different forum where all 
interested parties have the opportunity to consider the initiative or 
issue and explore options (see, e.g., 68 FR 52773, September 5, 2003) 
(announcing a public meeting on FDA's efforts to combat counterfeit 
drugs)). It would be inappropriate for this final rule to invoke other 
reasons for a bar code requirement when the administrative record has 
focused almost exclusively on the need to prevent or reduce medication 
errors.
    (Comment 65) One comment said that the rule could have a negative 
impact on hospital pharmacies if the bar code technology does not 
recognize generic drug products. The comment also stated that, if a 
pharmacy stocks one brand, and then stocks a different brand the next 
week, drugs from both brands might still be located in automated 
dispensing machines; in such a scenario, the comment asked how bar 
coding would work.
    (Response) The comment may have misunderstood the rule. Regarding 
generic drug products, the final rule requires the bar code to contain 
the drug's NDC number. Generic drug products have their own NDC numbers 
that are distinct from those used by other manufacturers. Thus, there 
should be no technological barrier to using the

[[Page 9146]]

bar code to identify generic drug products.
    As for automated dispensing machines, this rule is neither intended 
nor designed to assist in inventory control matters. Thus, a hospital 
pharmacy that mixes drugs from different sources in its automated 
dispensing machines (and presumably removes those drugs from their 
packages and accompanying labels) may not be able to use bar code 
technology to differentiate between different drugs inside the 
automated dispensing machine.
    (Comment 66) One comment said we should address the subject of 
prescribers' handwriting because misread or illegible handwriting may 
lead to medication errors. It added that we should address drug names 
that sound alike and copies of ``NCR paper'' that are difficult to 
read. The comment did not explain what it meant by NCR paper or why 
copies of such paper are difficult to read.
    (Response) Issues regarding handwriting and paper quality are 
outside the scope of this rule and may also be outside our 
jurisdiction.
    (Comment 67) One comment said we should do ``whatever it takes'' to 
decrease medication errors and increase the productivity of nursing 
staff. Another comment said that nurses need a trustworthy, correct, 
and speedy system that reduces workload and is more efficient than 
manual systems. It urged that nursing staff be involved and adequately 
trained in bar coding processes.
    (Response) The final rule should help detect potential medication 
errors before they can result in harm to patients and, as a result, 
decrease medication errors. However, insofar as nursing staff 
productivity is concerned, we believe that there may be an initial 
small productivity loss due to the use of new technology (see 68 FR 
12500 at 12527), but that, overall, the rule's benefits greatly exceed 
productivity loss.
    As for involving nursing staff in bar code systems development and 
training, such matters are outside the scope of this rule and may also 
be outside our jurisdiction.
    (Comment 68) One comment said that the pharmaceutical industry 
could support the necessary hardware and software to maintain databases 
on drug sample use and to alert pharmaceutical manufacturers when drug 
inventories are low. The comment suggested other data uses and database 
possibilities, such as making data available for physicians and the 
pharmaceutical industry (but protecting patients' identities) and 
having FDA control or regulate large databases on drug use and drug 
safety.
    (Response) Issues concerning the creation, financing, and 
maintenance of databases are outside the scope of this rule. Aside from 
our MedWatch program, we have no plans to control or regulate large 
databases on drug use and drug safety.
    (Comment 69) One comment said we should cover ``non-standard'' 
items at minimal cost to the pharmacy. The comment listed ointments, 
lipids, crash cart supplies, and total parenteral nutrition as examples 
of ``non-standard'' items, but it did not explain why such products 
needed bar codes.
    (Response) We decline to revise the rule as suggested by the 
comment. Requiring bar codes on prescription drugs, OTC drugs that are 
commonly used in hospitals and dispensed pursuant to an order, blood, 
and blood components will cover the majority of products that could 
present a risk of medication error. Thus, to the extent that any of the 
comment's ``non-standard'' items are prescription drugs or OTC drugs 
that are commonly used in hospitals and dispensed pursuant to an order, 
they would be subject to the bar code requirement unless otherwise 
exempted.
    As for a product's cost to pharmacies, we do not regulate the costs 
that firms may charge to pharmacies. Thus, product cost issues are 
beyond the scope of this rule, although we consider the rule's economic 
impacts in section VII of this document.
    (Comment 70) One comment asked for our guidance regarding scanners 
on certain intravenous infusion pump systems. The comment said that two 
manufacturers have infusion pump systems that are equipped with 
scanners, but the scanners only read bar codes used by the same 
manufacturer. The comment said that this practice forces hospitals to 
buy drugs from the same manufacturer who made the infusion pump system 
and creates a financial hardship on hospitals. The comment acknowledged 
that hospitals can relabel drugs themselves, but said that hospital 
relabeling would eliminate the rule's benefits.
    (Response) Issues concerning scanner capabilities in existing 
infusion pump systems are outside the scope of this rule. However, as 
we stated in our response to comment 41, the bar code's ability to 
affect medication error rates depends largely on the ability of 
hospitals to scan and interpret the data in the bar code. So, for 
example, choosing a commonly-used linear bar code symbology in a 
standard that scanners can easily read will have a greater impact on 
patient safety compared to a unique bar code symbology that few (if 
any) scanners are programmed to read.

I. How Will We Implement the Rule?

    The preamble to the proposed rule suggested that we would give 
affected parties 3 years to comply with the bar code requirement for 
human prescription drugs and OTC drugs commonly used in hospitals and 
dispensed pursuant to an order (see 68 FR 12500 at 12512). It suggested 
a similar implementation period for blood and blood components (see 68 
FR 12500 at 12514). The preamble to the proposed rule also invited 
comment on whether the implementation period should be shortened (see 
68 FR 12500 at 12529, question 9).
    (Comment 71) Many comments said that a 3-year implementation period 
is sufficient or acceptable, although some expressed a desire to have 
the final rule effective at the earliest possible date. One comment 
agreed that a 3-year implementation period is sufficient, but cautioned 
that packaging issues could complicate implementation.
    In contrast, many other comments advocated a shorter implementation 
period. These comments recommended different implementation periods, 
such as:
    [sbull] 2004 or December 31, 2004. Several comments sought 
implementation by 2004 because they believed that manufacturers, 
repackers, relabelers, and private label distributors could comply 
earlier or because, in one case, the entity submitting the comment 
explained that its contracts with drug suppliers require bar codes at 
the unit-of-use package level by 2004.
    [sbull] 2 years. One comment noted that some drug manufacturers are 
already placing bar codes on their products, so the comment felt the 
industry could meet a 2-year implementation period. Another comment, 
from a drug manufacturer, endorsed a 2-year implementation period 
because the rule only required the NDC number to be encoded in the bar 
code. A different comment said that manufacturers should obtain FDA 
approval of label changes (due to the bar code) within 2 years, but 
added that the implementation period could be reduced to 18 months if 
manufacturers supported such a reduction.
    [sbull] a tiered implementation strategy whereby drugs that we 
approve after the final rule's effective date must comply with a bar 
code requirement at an earlier time. Five comments suggested a 2-month 
period for drugs approved after the final rule's effective date, and 
some

[[Page 9147]]

comments suggested that drugs approved before the final rule's 
effective date should have no more than 3 years to comply.
    One comment requested that we shorten the implementation period 
without specifying a different implementation period.
    One comment declared that shortening the implementation period 
would be useless because hospitals would not be ready to use bar codes 
and because manufacturers have not analyzed possible changes to the NDC 
number.
    One comment asked whether products that are already on the market 
without a bar code can remain on the market through their expiration 
date.
    Only one comment advocated a longer implementation period. The 
comment said the implementation period should be 5 years if we refuse 
to create a general exemptions provision. The comment stated that the 
additional time would allow for further development of new technologies 
to address space limitations on small products.
    (Response) We have decided to amend the implementation scheme as 
follows. First, for drugs that are approved on or after the effective 
date of this rule, we would expect compliance within 60 days after the 
drug's approval date. Early implementation of a bar code requirement 
for newly-approved drugs is appropriate because such drugs will not 
present the same label redesign issues as previously-approved drugs.
    Additionally, early implementation of a bar code requirement for 
newly-approved drugs will create an incentive for all parties to 
develop and use bar codes, and this should have a beneficial impact on 
patient safety.
    Second, for drugs approved before the effective date of this rule, 
we would expect compliance within 2 years after that date. We agree 
with the comments that companies have already demonstrated their 
ability to put bar codes on their drug products quickly and agree that 
requiring only the NDC number in the bar code should facilitate 
implementation. A 2-year implementation period will also enable firms 
to exhaust existing stock. If a drug has an expiration date that 
exceeds 2 years, and the drug was not subject to the bar code 
requirement at the time it was marketed, we will allow that drug to 
remain on the market without a bar code.
    However, we recognize that we cannot preclude the possibility that 
some drug products may be difficult to bar code, either because of 
their containers, size, or other complications. Therefore, if a 
manufacturer, repacker, relabeler, or private label distributor can 
demonstrate to us that, for technological reasons, it cannot comply 
within 2 years after the final rule's effective date, it should contact 
us. If we agree that the firm cannot comply within 2 years, we may give 
the firm an additional year to comply with the rule. We will not 
entertain any requests for additional time based on non-technological 
considerations; for example, if a firm is unable to decide on which 
linear bar code symbologies to use, that indecision would not justify 
an additional year to comply with the rule. As another example, if a 
firm decided to encode more information (other than the NDC number) 
voluntarily, but was experiencing difficulties encoding that additional 
information, we would not agree to an additional year to comply with 
the rule.
    Firms who believe that technological reasons prevent them from 
complying within 2 years of the rule's effective date should contact 
the center responsible for their particular product. For human drug 
products, the contact office is the Office of New Drugs Compliance 
(HFD-020), Center for Drug Evaluation and Research, Food and Drug 
Administration, 5600 Fishers Lane, Rockville, MD 20857.
    For biological products, including blood and blood components, the 
contact office is the Office of Compliance and Biologics Quality (HFM-
600), Center for Biologics Evaluation and Research, Food and Drug 
Administration, 1401 Rockville Pike, Rockville, MD 20852.
    As for those comments that would defer implementation until any 
regulatory changes to the NDC number occur or would seek a 5-year 
implementation period if we refuse to create a general exemption 
provision, we decline to adopt their suggestions. Because we have not 
yet issued a drug establishment registration and listing proposal 
(which would include provisions regarding possible regulatory changes 
to the NDC number), we cannot predict how the NDC number will change or 
whether it will change at all. We can predict that the NDC numbers for 
drugs approved after the final rule's effective date should be unique 
(because we have devoted more attention to NDC numbers recently to 
ensure that they are unique), will remain unchanged even if we revise 
the NDC number system, and will be capable of being encoded in bar 
codes.
    Additionally, we decline to extend the implementation period to 5 
years to allow for possible technological developments for small 
products. As we noted in our response to comment 27, firms have placed 
linear bar codes on products as small as 1 mL vials, and the UCC itself 
stated that no pharmaceutical member to the UCC had presented a case of 
a product that was too small to bear an RSS bar code. Thus, existing 
bar code symbologies may be satisfactory for small packages. We also 
remind parties that there may be other options, such as changing 
packaging, to accommodate the bar code.
    (Comment 72) One comment focused on blood and blood components. The 
comment said the implementation period should be 1 year. The comment 
explained that ISBT 128 has been approved by CBER and the American 
Association of Blood Banks (AABB) since 2000 and that a 1988 AABB 
implementation task force had recommended an 18-month implementation 
plan.
    (Response) For uniformity among products we believe that a 2-year 
implementation period is appropriate for human drug products, 
biological products, and blood and blood components. Blood banks are, 
of course, free to implement the requirements of the rule on a shorter 
time schedule.
    (Comment 73) One comment asked if we could offer any incentives to 
manufacturers to get them to comply quickly with a bar code 
requirement.
    (Response) We have given manufacturers, repackers, relabelers, and 
private label distributors considerable flexibility in selecting their 
own linear bar code symbologies, their data standards (i.e., EAN.UCC or 
HIBCC), and the bar code's placement on the label. We have even 
simplified, to the maximum extent we can, the manner in which 
manufacturers, repackers, relabelers, and private label distributors 
would report their bar code label changes to us (i.e., through annual 
reports rather than supplements that require our approval). These 
efforts should minimize the regulatory burden on manufacturers (and 
others who are subject to the bar code requirements) and make it easier 
for them to comply with the rule at the earliest opportunity.

III. Legal Authority

    We believe we have the authority to impose a bar coding requirement 
for the efficient enforcement of various sections of the act. These 
include sections 201(n), 201(p), 501, 502, 503, 505, and 701(a)) of the 
act (21 U.S.C. 321(n), 321(p), 351, 352, 353, 355, and 371(a)), and 
sections 351 and 361 of the PHS Act (21 U.S.C. 262 and 264).
    A bar coding requirement for drugs, including biological products, 
would permit the efficient enforcement of the

[[Page 9148]]

misbranding provisions in section 502(a) and (f) of the act, as well as 
the safety and effectiveness provisions of sections 201(p) and 505 of 
the act. Bar coding is expected to significantly advance: (1) The 
provision of adequate directions for use to persons prescribing, 
dispensing, and administering the drug; (2) the provision of adequate 
warnings against use by patients where a drug's use may be dangerous to 
health; and (3) the prevention of unsafe use of prescription drugs.
    Section 502(a) of the act prohibits false or misleading labeling of 
drugs. This prohibition includes, under section 201(n) of the act, 
failure to reveal material facts relating to potential consequences 
under customary conditions of use. Information in a database that could 
be readily accessed through the use of a bar code, such as the drug's 
strength, dosage form, route of administration, and active ingredient 
and drug interactions is material with respect to consequences which 
might result from use of the drug under such conditions of use. Because 
all of the drugs (prescription drugs and the subset of covered OTC 
drugs) covered by this final rule may be used in the hospital setting, 
such use in hospitals can be considered the ``conditions of use as are 
customary or usual.'' Bar coding can be expected to reduce the 
incidence of the following types of medication errors:
    [sbull] Administering the wrong dose to a patient;
    [sbull] administering a drug to a patient who is known to be 
allergic;
    [sbull] administering the wrong drug to a patient or administering 
a drug to the wrong patient;
    [sbull] administering the drug incorrectly;
    [sbull] administering the drug at the wrong time; and
    [sbull] missing or duplicating doses.
    Because information accessed through use of the bar code will 
reveal material facts relating to potential consequences under 
customary conditions of use, the bar code requirements are justified 
under section 502(a) of the act.
    Section 502(f) of the act requires drug labeling to have adequate 
directions for use, adequate warnings against use of a drug product by 
patients where its use may be dangerous to health, as well as adequate 
warnings against unsafe dosage or methods or duration of 
administration, in such manner and form, as necessary to protect users. 
The bar code would make it easier for the person administering the drug 
to have full access to all of the drug's labeling information, 
including directions for use, warnings, and contraindications. 
Moreover, because the bar code's information would go to the computer 
where it could be compared against the patient's drug regimen and 
medical record, the person administering the drug will be able to 
determine whether the right patient is receiving the right drug 
(including the right dose of that drug in the right route of 
administration) at the right time. The person administering the drug 
will also be able to avoid giving products to a patient who might be 
allergic to, or otherwise unable to take, a particular drug. Because 
the bar code will facilitate access to information including adequate 
directions for use and adequate warnings, the bar code requirements are 
justified under section 502(f) of the act.
    In addition to the misbranding provisions, the premarket approval 
provisions of the act authorize FDA to require that prescription drug 
labeling provide the practitioner with adequate information to permit 
safe and effective use of the drug product. Under section 505 of the 
act, we will approve a new drug application (NDA) only if the drug is 
shown to be safe and effective for its intended use under the 
conditions set forth in the drug's labeling. Bar coding would allow 
health care professionals to use bar code scanning equipment to verify 
that the right drug (in the right dose and right route of 
administration) is given to the right patient at the right time. Thus, 
bar coding will ensure the safe and effective use of drugs by reducing 
the number of medication errors in hospitals and other health care 
settings.
    Section 505(b)(1)(D) of the act requires an NDA to contain a full 
description of the methods used in, and the facilities and controls 
used for, the manufacture, processing, and packing of such drug. The 
same requirement exists for abbreviated new drug applications (see 
section 505(j)(2)(A)(vi) of the act) and for biological products (see 
351(a)(2)(B)(i)(II) of the PHS Act). Information in the bar code would 
reflect the facilities and controls used to manufacture the product. As 
described in section II.C.1 of the preamble, the NDC number would 
identify the manufacturer, product, and package.
    A bar coding requirement also would permit the efficient 
enforcement of the adulteration provisions of the act. A regulation 
requiring the bar coding of products should avert unintentional mix up 
and mislabeling of drugs during labeling, packaging, relabeling, and 
repacking. A bar coding requirement therefore helps prevent 
adulteration under section 501(a)(2)(B) of the act. It is a 
manufacturing method or control necessary to ensure that a drug product 
has the identity and strength its labeling represents it to have, and 
meets the quality and purity characteristics which the drug purports or 
is represented to possess.
    Requiring that the bar code be surrounded by sufficient blank 
space, and remain intact under normal conditions of use, would also 
further the efficient enforcement of section 502(c) of the act. Section 
502(c) of the act provides that a drug product is misbranded if: any 
word, statement, or other information required by or under authority of 
the act to appear on the label or labeling is not prominently placed 
thereon with such conspicuousness (as compared with other labeling) and 
in such terms as to render it likely to be read and understood by the 
ordinary individual under customary conditions of purchase and use. The 
requirement that the bar code be surrounded by sufficient blank space 
and remain intact under normal conditions of use would help ensure that 
the bar code can be read easily and accurately so that its safety 
benefits may be realized.
    Because licensed biological products, including blood, are also 
prescription drug products, the sections of the act discussed elsewhere 
in the legal authority section provide ample legal authority for 
issuance of this regulation. However, there is also additional legal 
authority for the rule's requirements as to biological products 
regulated under the PHS Act. Section 351(a) of the PHS Act provides for 
the approval, as well as the suspension and revocation, of biologics 
license applications. The bar code requirement for biological drugs, 
and the machine-readable information requirement for blood and blood 
components, are designed to ensure the continued safe and effective use 
of licensed biological products. Thus, we may refuse to approve 
biologics license applications (BLAs), or may revoke already approved 
licenses, for biological products or blood and blood components that do 
not have such codes or information.
    Additionally, section 361 of the PHS Act authorizes regulations 
necessary to prevent the introduction, transmission, or spread of 
communicable diseases. With specific regard to blood and blood 
components, the requirement for machine-readable information will aid 
in the control of units that are at risk of spreading communicable 
diseases.
    After the effective date of any final rule, if a product required 
by the final rule to bear a bar code does not have such a bar code, the 
product may be considered adulterated or misbranded under the act and 
would be subject to

[[Page 9149]]

regulatory action. Our enforcement actions under the act include, but 
are not limited to, seizure, injunction, and prosecution, and violation 
may result in withdrawal of approval of a product's marketing 
application.

IV. Environmental Impact

    We have determined under 21 CFR 25.30(h) and (k) 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.

V. Paperwork Reduction Act of 1995

A. What Is the Estimated Information Collection Burden?

    This final rule contains information collection requirements that 
are subject to public comment and review by the Office of Management 
and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-3520). We describe the provisions below in this section of the 
document with an estimate of the annual reporting burden. Our estimate 
includes the time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing each collection of information.
    Title: Bar Code Label Requirement for Human Drug and Biological 
Products
    Description: We are issuing a new rule that would require human 
drug product and biological product labels to have bar codes. The rule 
requires bar codes on most human prescription drug products and on OTC 
drug products that are dispensed pursuant to an order and commonly used 
in health care facilities. The rule also requires machine-readable 
information on blood and blood components. For human prescription drug 
products and OTC drug products that are dispensed pursuant to an order 
and commonly used in health care facilities, the bar code would contain 
the NDC number for the product. For blood and blood components, the 
rule specifies the minimum contents of the machine-readable information 
in a format approved by the CBER Director as blood centers have 
generally agreed upon the information to be encoded on the label. The 
rule will help reduce the number of medication errors in hospitals and 
other health care settings by allowing health care professionals to use 
bar code scanning equipment to verify that the right drug (in the right 
dose and right route of administration) is being given to the right 
patient at the right time.
    Because bar code information for drugs subject to an NDA or ANDA 
will be reported through an annual report, this rule affects the 
reporting burden associated with 21 CFR 314.81(b)(2)(iii). Section 
314.81(b)(2)(iii) requires the submission of an annual report 
containing a representative sample of package labels and a summary of 
labeling changes (or, if no changes have been made, a statement to that 
effect) since the previous report. Here, the bar code would result in a 
labeling change. We have previously estimated the reporting burden for 
submitting labels as currently required under Sec.  314.81(b)(2)(iii), 
and OMB has approved the collection of information until March 31, 
2005, under OMB control number 0910-0001. We are not re-estimating 
these approved burdens in this rulemaking; we are only estimating the 
additional reporting burdens associated with the submission of label 
changes under Sec.  314.81(b)(2)(iii).
    Minor label changes for blood and blood components may be reported 
as part of an annual report, as described in 21 CFR 601.12(f)(3), and 
we would consider the machine-readable information on blood and blood 
component labels to be a minor change. We have previously estimated the 
reporting burden for submitting labels as currently required under 
Sec.  601.12(f)(3), and OMB has approved the collection of information 
until August 31, 2005, under OMB control number 0910-0338. We are not 
re-estimating these approved burdens in this rulemaking; we are only 
estimating the additional reporting burdens associated with the 
submission of label changes under Sec.  601.12(f)(3).
    Parties may also seek an exemption from the bar code requirement 
under certain, limited circumstances. Section 201.25(d) requires 
submission of a written request for an exemption and describes the 
contents of such requests.
    Description of Respondents: Manufacturers, repackers, relabelers, 
and private label distributors of prescription drug products, including 
biological products, or OTC drugs that are dispensed pursuant to an 
order and commonly used in hospitals.
    We estimate the burden of this collection of information as 
follows:

                                 Table 1.--Estimated Annual Reporting Burden\1\
----------------------------------------------------------------------------------------------------------------
                                             Annual
 21 CFR Section    No. of Respondents     Frequency of     Total Annual      Hours per          Total Hours
                                           Responses        Responses        Response
----------------------------------------------------------------------------------------------------------------
201.25 and                      1,447             31.1           45,000        24 hours     1,080,000
 610.67
----------------
Sec.                               40                1               40        24 hours           960
 201.25(d)
----------------
314.81(b)(2)(ii                 1,447              5.9            8,576    10.5 minutes         1,497
 i)
----------------
601.12(f)(3)                      211                1              211        1 minute             3.5
----------------
606.121(c)(13)                    981         42,507.7     41.7 million        1 minute       695,000
----------------
Total                                                                                       1,777,550.5
----------------------------------------------------------------------------------------------------------------
\1\ There are no capital costs or operating and maintenance costs associated with this collection of
  information.

    Our estimates are based on the following assumptions:
    [sbull] For prescription drugs whose label changes would be 
reported in an annual report pursuant to Sec.  314.81 or Sec.  
601.12(f)(3) for biological products), there are approximately 1,447 
registered establishments that would be reporting. Information on 
listed drugs indicates there are 89,800 separate, identifiable product 
packages that will comply with the bar code requirement. These packages 
account for 8,576 separate and distinct products (each product is 
marketed in an average of 10.47 packaging variations). This means that 
the annual frequency of reports would be 5.9 (8,576 products subject to 
annual

[[Page 9150]]

reports/1,453 registered establishments = 5.92 products per registered 
establishment, which we have rounded down to 5.9). Section 
314.81(b)(2)(iii) requires firms to submit an annual report that 
includes a summary of any changes in labeling since the last annual 
report. Similarly, Sec.  601.12(f)(3)(i)(A) requires manufacturers of 
biologics to include in their annual reports editorial or similar minor 
labeling changes. We expect that the addition of a bar code to a label 
would necessitate a simple statement in the annual report declaring 
that the bar code has been added, so we have assigned an estimate of 
one minute for such statements per label. Each product's annual report 
would include labels for all packaging variations. Thus, the total 
reporting burden would be 1,496.67 hours ((8,576 reports x 10.47 labels 
(or one label per packaging variation) per report x 1 minute per 
report)/60 minutes per hour = 1,496.67 hours), which we have rounded up 
to 1,497 hours.
    [sbull] For minor labeling changes for blood and blood components 
included in an annual report under Sec.  601.12(f)(3)(i)(A), FDA's 
database indicates there are 211 licensed manufacturers of transfusable 
blood and blood components. We expect that the addition of machine-
readable information to the label of blood and blood components would 
necessitate a simple statement in the annual report declaring that the 
machine-readable information has been added, so we have assigned an 
estimate of one minute for such statements. Thus, the total reporting 
burden would be 3.5 hours ((211 reports x 1 minute per report)/60 
minutes per hour = 3.516 hours), which we have rounded down to 3.5 
hours.
    [sbull] For the requirement in Sec.  601.121(c)(13) to include 
machine-readable information on blood and blood components, FDA's 
registration database indicates there are 981 blood and plasma 
establishments. The AABB estimates that approximately 13.9 million 
blood donations are collected annually. We estimate that each blood 
donation yields approximately three blood components. This means that 
the frequency of responses is approximately 41.7 million occurrences 
(13.9 million blood donations x 3 blood components per donation) 
divided by 981 establishments or 42,507.645 occurrences per 
establishment, which we have rounded up to 42,507.7. We estimate that 
it takes one minute to apply a machine-readable code manually; if a 
blood collection facility uses an on-demand printer, the time would 
range between 15-30 seconds. For purposes of this estimate, we adopt 
the larger time estimate of one minute per machine-readable information 
for blood, thus resulting in an annual reporting burden of 695,000 
hours ((41.7 million reports x 1 minute per report) /60 minutes per 
hour = 695,000 hours). However, we reiterate that facilities using on-
demand printers would face lower burdens. In addition, blood collection 
centers are currently allowed and encouraged to apply machine-readable 
information to collections. This burden estimate accounts for requiring 
an activity that is currently voluntary and does not reflect an 
additional activity.
    [sbull] For exemption requests under Sec.  201.25(d), we believe 
that few products would warrant an exemption from the bar code 
requirement. Consequently, based on our experience with other exemption 
provisions, we estimate that there may be 40 exemption requests per 
year and that each exemption request will require 24 hours to complete. 
This should result in an annual reporting burden of 960 hours (40 
requests per year x 24 hours per request = 960 hours).

B. What Comments Did We Receive on Our Estimates?

    Several comments disagreed with our estimates, and one comment even 
disagreed that the rule would have practical utility insofar as its 
products were concerned.
    (Comment 74) Specifically, two comments from allergenic extract 
firms disagreed with our claim that reporting label changes would take 
only 1 minute. One comment claimed that the estimate would be 400 hours 
for its firm, based on 15 minutes per label report and 30 product 
labels per report. It declared the burden to be ``onerous and 
unnecessary.'' The comment declared that the rule would not enhance our 
oversight of the allergenic extract industry and would not reduce 
medication errors because allergenic extracts are administered in 
physician's offices and clinics where ``mistakes do not normally 
occur.'' The second comment stated that its firm would have to submit 
label changes for 1,200 labels and 1,200 packages at 10 minutes per 
report, for a total burden of over 400 hours, and declared this would 
be an ``unnecessary hardship'' on a small firm.
    (Response) The final rule exempts allergenic extracts from the bar 
code requirement, so the comments' claims are moot. However, we 
reiterate that we expect that the addition of a bar code to a label 
would necessitate only a simple statement in the annual report, which 
is already a required document (see 68 FR 12516; 21 CFR 314.81). This 
statement would simply declare that the bar code has been added to the 
label. So, for example, if the statement in the annual report was, ``We 
added a bar code to the label pursuant to 21 CFR 201.25,'' it is 
difficult to see why such a statement requires 10 or 15 minutes to 
prepare or insert into an annual report, and even more difficult to see 
why such a statement results in a 400-hour burden for a firm. The 
comments did not explain how it arrived at its estimate of 10 and 15 
minutes per report, so, because we have no basis to evaluate the 
accuracy of the comments' larger time estimates, we decline to adopt 
them.
    (Comment 75) One comment from a medical gas firm said that we 
underestimated the number of firms subject to the rule. The comment 
said that there are over 3,000 medical gas sites alone.
    (Response) Our estimate was based on the number of firms that have 
registered with FDA, and one should remember that the final rule 
applies to manufacturers, repackers, relabelers, and private label 
distributors who are subject to the drug establishment registration 
requirements (see Sec.  201.25(a)). We do not know whether the 
comment's claim of over 3,000 medical gas ``sites'' includes firms that 
are not subject to our drug establishment registration requirements, 
but if a firm is not subject to the drug establishment registration 
requirement, then it would not be subject to the bar code requirement.
    Yet, even if we were to accept the comment's estimate of 3,000 
medical gas establishments and assumed that all were subject to the 
drug establishment registration requirements, we do not need to change 
our Paperwork Reduction Act estimates because the final rule exempts 
medical gases from the bar code requirement.
    The information collection provisions in this final rule have been 
approved byOMB. (OMB control number: 0910-0537; expiration date 2/28/
07).
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number.

VI. Federalism

    We have analyzed this final rule in accordance with the principles 
set forth in Executive Order 13132. We have determined that the rule 
does not contain policies that have substantial direct effects on the 
States, on the relationship between National Government and the States, 
or on the distribution of power and responsibilities among the various

[[Page 9151]]

levels of government. Accordingly, we have concluded that the rule does 
not contain policies that have federalism implications as defined in 
the Executive order and, consequently, a federalism summary impact 
statement is not required.

VII. Analysis of Impacts

A. Introduction

    We have examined the rule under Executive Order 12866, the 
Regulatory Flexibility Act as amended by the Small Business Regulatory 
Enforcement Fairness Act, the Unfunded Mandates Reform Act, and the 
Congressional Review Act. 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, distributive impacts and equity). Under the 
Regulatory Flexibility Act (as amended by the Small Business Regulatory 
Enforcement Fairness Act), if a regulation has a significant economic 
impact on a substantial number of small entities, we must analyze 
regulatory options that would minimize the impact on small entities. 
Section 202(a) of the Unfunded Mandates Reform Act requires that 
agencies prepare a written statement of anticipated costs and benefits 
before proposing any regulation that may result in expenditure by 
State, local, and tribal governments, or by the private sector of $100 
million in any one year (adjusted annually for inflation). Currently, 
such a statement is required if costs exceed about $110 million for any 
one year. The Congressional Review Act requires that regulations 
determined to be major must be submitted to Congress before taking 
effect.
    The regulation is consistent with the principles set forth in 
Executive Order 12866 and the three statutes. We have identified the 
regulation as an economically significant regulatory action, as defined 
in Executive Order 12866. We believe the regulation is unlikely to have 
a significant impact on a substantial number of small entities. The 
expected impact of this regulation is greater than $110 million in a 
single year and therefore is considered a major regulatory action as 
defined by the Unfunded Mandates Reform Act. The Office of Information 
and Regulatory Affairs (OIRA) in the Office of Management and Budget 
(OMB) has determined this regulation to be major under the 
Congressional Review Act.
    We estimate that the rule provides net benefits to society of $3.4 
billion to $3.6 billion annually, depending on whether a discount rate 
of 3 percent or 7 percent is used. This estimate relies on work by the 
Eastern Research Group, Inc. (ERG), which we contracted to collect 
data, interview industry experts, and analyze the costs and benefits of 
the rule. The detailed analysis and references in support of the 
impacts summarized in Table 2 is included in the docket as Reference 46 
and is available on FDA's Web site. In section VII.O below, we present 
our analysis of the substantial uncertainty in the estimates presented 
in Table 2.

          Table 2.--Estimated Impacts of the Final Rule in Millions of Dollars Annualized Over 20 Years
----------------------------------------------------------------------------------------------------------------
                                            Anticipated                       Net Benefits         Potential
      Discount Rate         Regulatory       Hospital        Societal       (benefits minus         Hospital
                               Costs          Costs*        Benefits**           costs)         Efficiencies***
----------------------------------------------------------------------------------------------------------------
7 Percent                             $8            $660          $5,200  $4,500                    $380 to $600
-------------------------
3 Percent                             $7            $600          $4,900  $4,300                    $360 to $570
----------------------------------------------------------------------------------------------------------------
Note: These estimates may not sum because of rounding.
*Costs due to voluntary accelerated purchase and utilization of bar coding systems
**Benefits to public health due to avoidance of adverse drug events
***Potential additional benefits from efficiencies in reports, records, inventory, and other hospital
  activities.

    Table 2 presents the total expected regulatory costs to 
manufacturers, repackers, relabelers, retail outlets, and FDA. Most of 
these costs will occur during the first several years after 
implementation. Table 2 also shows the estimated opportunity costs of 
the expected accelerated investment in bar coding systems by the 
hospitals. These investment expenditures are necessary to achieve the 
societal benefits expected from the rule. Table 2 also shows our 
estimated range of possible efficiencies in hospital activities 
associated with accelerated adoption of technology. Both anticipated 
hospital costs and the societal benefits would occur after hospitals 
purchase and install the necessary equipment to take advantage of bar 
codes. The net benefit of the rule is the societal benefit minus the 
induced expenditures minus the regulatory costs. The net benefits of 
the rule, which are $3.6 billion and $3.4 billion per year if 
annualized at 7 percent and at 3 percent, are $38 billion and $51 
billion in present value terms, if calculated at 7 percent and 3 
percent discount rates respectively. These estimates, however, account 
for neither expected potential hospital efficiencies, nor income 
transfers following fewer awards for medical malpractice.
    While efficiency gains in hospital recordkeeping and reporting 
procedures produce societal benefits, we are extremely uncertain that 
hospitals would make the additional investments to achieve them. This 
final rule focuses on the use of bar code technology only in hospital 
pharmacies and patient care wards. Such systems could provide the 
opportunity and incentive for hospitals to expand bar code technology 
into other areas of operation, such as billing or supply ordering. The 
installation of bedside systems may make such an expansion more likely, 
but we believe it would not be a direct effect of this final rule. In 
addition, the estimated efficiency gains are extremely uncertain. 
However, we have noted the potential of these additional gains, but 
have not claimed them as direct benefits of this final rule.
    We also note that reductions in income transfers from the potential 
reduction in medical malpractice awards and reductions in medical 
liability insurance that may occur with reductions in adverse drug 
events are not considered societal benefits because they do not 
represent resource or opportunity savings. These effects are discussed 
later in this section, but do not contribute to the estimated net 
benefits shown in Table 3.

B. Objective of the Rule

    The objective of the rule is to enable the health care sector to 
utilize technological solutions to reduce preventable adverse drug 
events (ADEs)\1\ and acute hemolytic

[[Page 9152]]

transfusion reactions (AHTRs) associated with medication errors\2\ and 
transfusion errors in hospitals.\3\
---------------------------------------------------------------------------

    \1\ For this analysis an adverse drug event (ADE) is an injury 
from a medicine (or a lack of an intended medicine) (source: 
American Society of Hospital Pharmacists, 1998). The definition used 
for the analysis in the proposed rule included AHTRs, which are 
shown separately for the final rule's analysis.
    \2\ For this analysis a medication error is a preventable event 
that may cause or lead to inappropriate medication use or patient 
harm while the medication is in the control of the health care 
professional, patient, or consumer (source: NCCMERP, 2002).
    \3\ For this analysis a hospital is a facility that provides 
medical, diagnostic and treatment services that include physician, 
nursing and other health services to inpatients and the specialized 
accommodation services required by inpatients (source: NAICS, 2002). 
We have excluded psychiatric, alcohol and chemical dependency, 
rehabilitation, and other specialty hospitals. We have included 
general medical and surgical hospitals in which the average stay is 
less than 30 days.
---------------------------------------------------------------------------

C. Estimate of Preventable Adverse Drug Events and Acute Hemolytic 
Transfusion Reactions

    In 1999, the Institute of Medicine (IOM) issued a report that drew 
public attention to the number of deaths that occur each year in the 
United States from preventable medication errors in hospitals. A 
significant proportion of the reported deaths, as well as the 
additional illnesses and morbidities, were associated with errors 
involving FDA-regulated products, especially medications. This section 
briefly describes our efforts to estimate the current number of 
preventable ADEs and AHTRs.
    The public health literature includes many attempts to determine 
the rate of preventable ADEs in United States hospitals, although these 
studies typically employed varying methodologies and definitions. Our 
methodology begins by multiplying estimated hospital admissions by 
reported rates of ADEs per admission. We combined the resulting number 
of ADEs per hospital per year with the reported ratio of preventable to 
total ADEs to estimate the number of preventable ADEs per hospital per 
year. We first developed these calculations for various hospital size 
classes and then aggregated the data to present national estimates. We 
relied on published literature to derive ADE rates for each major stage 
of the medication process in hospitals. We then projected preventable 
ADEs for the entire evaluation period based on expected future 
increases in hospital admissions.
    We used a similar methodology to estimate preventable AHTRs.
    ERG identified four comparable published studies that reported 
rates of ADEs per hospital admissions (Refs. 2 to 5). The reported 
incidence rates of hospital admissions with ADEs ranged from 2.4 
percent to 6.5 percent with a mean rate of 4.3 percent. According to 
AHRQ, there were 29.1 million non-obstetric hospital admissions during 
2000 \4\. We multiplied these admissions by 0.043 and found that 
approximately 1.25 million ADEs occur annually in United States 
hospitals. The same four studies reported that between 15 percent and 
49 percent of all ADEs are preventable. We used the mean of these 
studies to estimate that about 373,000 (30 percent) of these ADEs were 
preventable. Based on published reports (Refs. 2 and 6), we also 
estimated that 1,048,000 potential ADEs\5\ are either intercepted 
before reaching the patient or do not cause an injury. According to 
projected increases in hospital expenditures and population 
demographics that imply future increases in hospital admissions, the 
annual number of preventable ADEs would total 478,000 within 20 years.
---------------------------------------------------------------------------

    \4\ Obstetric admissions are rarely associated with ADEs. The 
referenced articles have eliminated these admissions in their 
analyses. Reasons for the low probability of ADEs include the 
relatively healthy state of most admissions as well as the low 
number of medications.
    \5\ A potential ADE is a medication error that could have caused 
an ADE, but did not. Potential ADEs include medication errors that 
were intercepted before reaching the patient. Potential ADEs include 
any errors that do not involve patients.
---------------------------------------------------------------------------

    ERG searched the public health literature to identify stages in the 
hospital medication process in which errors occur and concluded that 
the medication stages of prescribing, transcribing, dispensing, and 
administration provide a useful analytic structure. The most common 
reported ADE symptom was cardiac arrhythmia followed by itching and/or 
nausea. Relatively few fatalities have been documented as preventable 
ADEs, but several published studies conclude that 2.8 percent of all 
preventable ADEs probably result in fatalities. Another study has 
asserted that as many as 2.7 percent of all ``negligent'' (as defined 
in the study) ADEs resulted in permanent disability. We used these 
estimates in our analysis.
    AHTRs resulting from erroneous blood transfusions have been 
extensively studied and widely reported. Based on data provided by the 
National Blood Data Resource Center (NBDRC), ERG estimated that United 
States hospitals currently transfuse approximately 15.7 million units 
of whole blood and red blood cells to 5.2 million patients per year. 
According to recent studies (Ref. 27) the frequency of erroneous ABO-
incompatible transfusion errors is approximately 1 per 38,000, or 414 
errors per year. Another study (Ref. 7) has estimated that two-thirds 
of all incompatible transfusions were the result of preventable errors. 
Using this figure, the current number of annual preventable erroneous 
blood transfusions that result in AHTRs is 276. In addition, the 
literature reports that potential blood transfusions that could have 
resulted in adverse outcomes but did not account have a frequency five 
times actual errors (Ref. 8). Thus, we have estimated 276 preventable 
and 1,380 potential AHTRs occur in hospitals each year. The NBDRC has 
estimated an annual growth rate of transfusions of 6 percent. 
Discussions with hospital personnel believe this may be an 
overestimate, so we have used a 3 percent annual growth in transfusions 
to forecast preventable AHTRs over time. Therefore, within 20 years we 
expect 498 preventable and 2,492 potential AHTRs in the absence of this 
regulation.

D. The Final Rule

    With certain exceptions, we are requiring linear bar codes on 
almost all prescription drug and biological products (including 
vaccines) and all over-the-counter (OTC) drug products commonly used in 
hospitals and dispensed pursuant to an order. We are also requiring the 
use of machine-readable information on all human blood and blood 
components intended for transfusion. For drug products, this 
information will include National Drug Code (NDC) number identifying 
the dosage, strength, nature, and form of each administered product and 
be portrayed in a linear bar code\6\ and include product-specific and 
package-specific NDC numbers. We will maintain a database of all unique 
NDC numbers and ensure these data are available for use in commercial 
computerized systems that can provide bedside bar code identification. 
The bar code requirement would be effective within 2 years. For blood 
and blood components, the machine-readable information will include 
information identifying the facility, the lot number relating to the 
donor, a product code, blood type, and Rh.
---------------------------------------------------------------------------

    \6\ A bar code is a graphic representation, in the form of bars 
and spaces of varying width of numeric or alphanumeric data.
---------------------------------------------------------------------------

    We are issuing this rule because private markets have failed to 
establish the standardized bar codes that are needed to motivate 
hospitals to adopt an important health-saving technology. In 
particular, we believe that the private market's failure to develop 
standardized bar codes has impeded the growth of the technological 
investment necessary to

[[Page 9153]]

reduce the number of ADEs and AHTRs in the nation's hospitals. We find 
that a regulatory intervention to establish a standardized system of 
bar codes is needed to address this market failure.
    The final rule will increase costs to the manufacturers, repackers, 
relabelers, and private label distributors of the affected products by 
requiring changes in manufacturing, packaging, and labeling processes. 
It will also increase costs to some hospitals by requiring a change in 
some bar code readers associated with these products. The final rule 
will also require FDA resources to ensure industry compliance with the 
bar coding requirement and additional resources to maintain a 
computerized database of NDC numbers. Once bar codes are standardized, 
the final rule will enable hospitals to take advantage of the coded 
information that would permit hospitals to reduce ADEs, while achieving 
other operational cost efficiencies. The final rule will also enable 
other sectors to use machine-readable technology in ways that would 
benefit public health (for example, accessing up to date labeling 
information from home computers or identifying drugs subject to 
recalls).

E. Description of Affected Sectors

1. Current Machine-Readable Technologies
    Prior to developing the rule, we contracted with ERG to examine the 
current machine-readable technologies available for use by the health 
care sector and report on trends. The resulting report is included in 
the docket (Ref. 9), and summarized here.
    Bar coding is currently the most widely used machine-readable 
technology and is also the technology most likely to see increased 
acceptance in the near future. Health care companies have sponsored two 
organizations that have each developed different bar code 
symbologies;\7\ the Uniform Code Council's Universal Product Code (UPC) 
and the Health Industry Business Communication Council's Health 
Industry Bar Code (HIBCC). UPC codes are more widely used in retail 
stores while HIBCC is specially designed to safeguard against errors. 
However, although HIBCC codes have been effectively used in the medical 
device industry, they have not won wide acceptance within 
pharmaceutical markets. Within these symbologies, the groups have 
defined acceptable linear (or one-dimensional) codes, two-dimensional 
codes, and composite codes (a combination of one- and two-dimensional 
symbologies). The advantage of two-dimensional and composite codes is 
that they can include additional information in the same area. 
Potential disadvantages of two-dimensional and composite symbologies 
are the higher costs for readers and scanners and the additional risk 
of uncertain data recovery by misinterpreting coded information.
---------------------------------------------------------------------------

    \7\ A symbology refers to a distinct technological, machine-
readable language.
---------------------------------------------------------------------------

    While these organizations' bar codes are widely used, their use for 
the prevention of ADEs remains limited. Most pharmaceutical and OTC 
manufacturers use bar codes to move shipping cases through their 
distribution chain, but relatively few pharmaceuticals are sold with 
the specific bar codes required by this rule. Some hospitals use 
computer-controlled technology to add their own bar codes to incoming 
products.
    Bar code systems require printers, scanners, and software to ensure 
that correct information is communicated. According to discussions with 
consultants, pharmaceutical manufacturers prefer to label products as 
late as possible in the manufacturing process in order to maximize 
flexibility. Printing technology advancements have allowed more 
printing options to be available. Manufacturers currently use contract 
label printers or packagers along with in-house operations. Contract 
printers are commonly used for preprinted labels that do not carry 
customized data. Currently, ink jet and thermal printers may be 
appropriate for production line printing of bar codes, although ink jet 
printers may cause difficulties in media compatibility, print speed, 
and resolution. Water-based inks can streak or blur, but non-water 
soluble inks produce a shine that reflects to the scanner and affects 
how the bar code is read. Laser printers are subject to toner flaking, 
which makes them unreliable for long-term bar code printing. Production 
line speeds may also create problems for bar code resolution levels.
    The complexities of bar code scanners have evolved as the codes 
have become more data intensive. Most scanners in current use are 
laser-based systems designed to read linear bar codes. In health care 
settings, scanners are routinely programmed to discriminate among the 
symbologies they are likely to encounter. Some laser scanners can also 
read composite or two-dimensional codes, if properly programmed. These 
scanners are more costly, and some consultants have cautioned that 
multiple data systems may introduce potential misreading at hospital 
bedsides. Moreover, in certain situations, health care scanners may not 
need to use all of the available information. For example, scanners at 
bedside point of care may only need to capture limited identifying 
information while the central dispensing pharmacies may require full 
database capabilities. At this time, the scanning industry is confident 
that linear standards\8\ will be readily accessible, whereas other 
standards may require additional market research. We believe that 
scanners will work in conjunction with hand-held personal digital 
assistants (PDAs) in hospital wards due to their portability and multi-
functional characteristics.
---------------------------------------------------------------------------

    \8\ A standard refers to a general description of a system of 
machine-readable languages.
---------------------------------------------------------------------------

2. Manufacturers and Packagers of Affected Products
    A large majority of exterior pharmaceutical packages already 
include the NDC number in a bar code, according to discussions with 
staff at two large Veteran Health Administration Comprehensive Mail 
Order Pharmacies. The final rule, however, by requiring this bar coded 
information on the drug's label, may result in a bar code on both 
exterior and interior packaging. In addition, some prescription and OTC 
drug products are already sold in blister packs, where individual pills 
or capsules are enclosed in a bubble. Prescription products are often 
repackaged into blister cards for more convenient use in hospitals. 
While some blister cards may now be labeled with bar codes for 
specified concerns, many are not. OTC drug products in blister packs 
rarely have bar coded information. Moreover, many bar coded exterior 
packages cannot be read by hospital or retail scanners, because 
manufacturers use bar codes for sales promotions and other special 
offers that have separate and distinct NDC numbers that do not appear 
in all customer databases.
    There are currently about 1,218 establishments in the 
Pharmaceutical and Biologic Preparation industries (NAICS 325412 and 
325414). Based on the size distribution of industry establishments, we 
estimate a total of about 3,513 in-house packaging production lines. In 
addition, an estimated 229 establishments in the Packaging and Labeling 
Services industry (NAICS 561910) are dedicated to serving the 
pharmaceutical industry, accounting for an additional 482 packaging 
lines. Overall, we estimate that 3,995 packaging lines are used in 
1,447 establishments for these products.
    In addition, we estimate there are 981 blood collection centers in 
the United States (NAICS 621991). Each of these collection centers acts 
as a separate

[[Page 9154]]

packaging line. Consultants have estimated that about 25 percent of 
these blood collection centers are included in published industry 
counts. We added blood collection centers to the industry packaging 
lines for a total of 4,976 affected packaging lines in 2,428 separate 
establishments.
    The number of separate trade and generic named affected products is 
about 17,000, an increase greater than 500 percent since 1990. Each of 
these named products may be marketed in varying strengths or dosage 
forms. Using data from the current NDC number list, we have estimated 
there are 78,000 separate prescription unit-of-sale packages, 98,000 
OTC drug packages, and 2,000 blood/vaccine packages. Over time, the 
number of distinct packaging units is expected to continue to increase. 
The OTC drug industry has suggested that as many as 10 percent of OTC 
packages (9,800 packages) are commonly used in hospital settings and 
would be subject to the bar code rule. For example, OTC analgesics that 
may be dispensed to a patient pursuant to an order would be subject to 
the final rule, but shampoos or toothpastes that may be provided would 
not. The Consumer Healthcare Products Association (CHPA) estimated that 
as many as 10 percent of their member's products were regularly 
dispensed from hospital pharmacies or packaged specifically for sale to 
hospitals. Other responses include a report from a hospital that only 
200 OTC products are routinely dispensed. However, discussions with OTC 
manufacturers and hospital pharmacists have indicated larger potential 
coverage. Hospital pharmacists periodically order wide arrays of 
products from catalogs. While some categories of OTC products are 
unlikely to be affected by the regulation, ERG has estimated that as 
many as 75 percent of OTC shelf-keeping units (SKUs) could potentially 
be used in hospitals and subject to the requirement of this regulation. 
For purposes of this analysis, because we do not know the specific SKUs 
that will be ``commonly used in hospitals,'' we have assumed that 75 
percent of all OTC drug products (73,500 SKUs) would be required to 
provide bar coded information. Overall, 153,500 separate unit-of-sale 
packages are expected to be subject to the final rule.
    OTC drug manufacturers frequently redesign labels. Based on 
discussions with manufacturers, the majority of OTC labels are 
redesigned within a 6-year cycle for marketing reasons. Many products 
have redesigned labels every 2 or 3 years. Prescription drug product 
labels may be redesigned less frequently, but there is evidence that 
numerous labeling changes occur. We examined selected NDA files and 
found that changes to prescription drug product labels occur, on 
average, more than once per year. While marketing of prescription drug 
products may not be as sensitive to labeling graphics and package 
design as OTC products, there are many other reasons why manufacturers 
change their product labels. For this analysis, we have nevertheless 
assumed that the final rule will result in significant involuntary 
relabeling by the industry.
3. Retail Outlets
    Retail pharmacies currently have the capability to read linear 
standardized bar codes at their in-house scanners. According to the 
National Association of Chain Drug Stores, there are 55,000 community 
and chain pharmacies (NAICS 446110), and pharmacies in supermarkets and 
mass merchandisers (NAICS 445110) that utilize over 515,000 scanners. 
The expected useful life of a retail scanner is 5 years.
    The current stock of scanners in retail outlets may require 
upgrades or replacement if the bar code rule were to mandate reduced 
space symbology (RSS). These upgrades would not be a direct requirement 
of the alternative, but would have been necessary for these entities to 
continue with bar coded activity. The retail sector currently relies on 
UPC or other symbologies and adopting such a standard would not require 
scanner replacements or upgrades. The final rule covers only those OTC 
drug products commonly used in hospitals and dispensed pursuant to an 
order. Although small vials or bottles may require specific RSS 
symbology, these items are available to consumers in larger packages 
that accommodate current standards for retail outlets. The regulation 
is not expected to impact this sector, but, in developing this rule, we 
have considered alternatives that would affect retail outlets.
4. Hospitals
    The final rule does not require hospitals to introduce the new 
automated technologies, but the development of consistent bar codes on 
drugs and consistent machine-readable information on blood and blood 
components will greatly encourage hospitals to implement bar code based 
systems to reduce ADEs associated with medication errors. Moreover, 
unit-dose blister packs and other vials and small bottles would 
probably need bar codes using the RSS symbology. In order to properly 
scan these products, hospitals that currently have installed bar code 
readers would have to upgrade or replace some scanners. According data 
from the National Center for Health Statistics (NCHS), there are 5,040 
hospitals in the United States (NAICS 622) with a total of about 
850,000 beds that will be likely to use bar code technology. Estimates 
of personnel in these hospitals include 48,500 pharmacists, 44,500 
pharmacy assistants, and almost 1.2 million nurses. Overall, a nurse is 
responsible for 3 beds per shift. An average hospital includes 170 beds 
and employs about 10 pharmacists, 9 pharmacy assistants, and 237 
nurses.
    Hospitals are currently adopting bar code technology to better 
control the entire medication process and improve the delivery of care 
to patients. Virtually all hospital pharmacies use bar code scanners 
for inventory and stock keeping activities, but only approximately 1 
percent of all hospitals have installed bedside, point-of-care systems 
that use bar coded information. An additional 3 percent of hospitals 
use some form of computerized system in the medication process, but not 
all use bar codes. Overall, an estimated 2 percent of all hospitals 
(101 hospitals) currently use bar codes in everyday operations. Even in 
the absence of the regulation, we expect the remaining 4,939 hospitals 
to gradually implement computerized tracking systems. Discussions with 
industry consultants and the American Hospital Association (AHA), 
however, suggest that without standardization, hospitals would need an 
estimated 20 years to adopt and use systems with bar code readers and 
to use in-house overpackaging and self-generation of bar code 
identifiers. ERG discussed with several consultants whether 20 years is 
a realistic horizon for acceptance of this technology. While they 
recognized the uncertainty of future projections in this area, industry 
experts felt that 20 years was not an unreasonable expectation. We 
examined the impact of alternative future acceptance rates as a 
sensitivity analysis.
    We requested comments on the potential uses of bar code information 
on drug products at a public meeting held on July 26, 2002. Comments 
from that public meeting indicated that while patient safety reasons 
were the primary goals for installation of scanning systems, there are 
other potential uses. Industry groups and individual hospitals noted 
that installation of scanning systems may lead to more efficient 
inventory control, purchasing and supply utilization, and other 
potential risk management activities.

[[Page 9155]]

 Other groups noted that an integrated computerized network would 
assist billing and laboratory systems as well. The AHA stated that bar 
codes would improve patient care and safety, increase workforce 
productivity and satisfaction, streamline payment, billing, and 
administrative systems, lead to efficient management of assets and 
resources, and meet consumer expectations for service and access to 
information. We believe these comments indicate that internal 
investment decisions concerning the acquisition of computerized systems 
entail additional returns that are in addition to ADE and AHTR 
avoidance. While some of these returns to hospitals (such as reduced 
liability awards and malpractice liability insurance premiums) may be 
partly transfers, we believe such additional efficiencies are likely.
5. Nursing Homes and Long-Term Care Facilities
    We analyzed the potential impact of bar code technology for the 
prevention of preventable ADEs in nursing homes and other long-term 
care facilities (NAICS 623110). According to the American Health Care 
Association (AHCA), there are 16,456 nursing homes in the United 
States, 11 percent of which are hospital-based. These facilities 
account for about 1.8 million beds with an occupancy rate of over 85 
percent. The AHCA estimates there are 561.7 million patient-days in 
nursing homes each year, with 1.5 million annual admissions. Most 
nursing homes are serviced by long-term care (LTC) pharmacies. There 
are approximately 3,000 of these pharmacies, including those that only 
service nursing homes.
6. FDA Oversight and Responsibilities
    We would be affected in three areas. For successful bar code use, 
hospitals need access to the unique NDC numbers that identify specific 
active ingredients, packages, dosage forms, and units. We would 
maintain the database containing these unique identifiers and arrange 
access to it for the private sector.
    We would also develop and maintain a process of reviewing and 
granting exemptions to these regulatory requirements for specific 
products. Although we estimate that we will receive approximately 40 
annual exemption requests, we cannot accurately predict the resources 
required to process these exemption requests.
    The third area in which our activities would be impacted by the 
final rule would be our use of compliance resources. The final rule 
requires affected products to have bar coded information (or machine-
readable information in the case of blood and blood components). 
Although the exact impact on our compliance resources is not 
quantified, we recognize that the creation of new regulatory 
requirements will need additional resources to ensure compliance.

F. Regulatory Costs of the Final Rule

1. Introduction
    We estimated costs for a 20-year evaluation period to reflect the 
time that hospitals would take to invest in bar code technology in the 
absence of the regulation. This summary describes these costs and 
presents both the present value (PV) and the annualized value of the 
cost streams. We analyzed costs to the affected sectors over the entire 
evaluation period using both 7 percent and 3 percent annual discount 
rates. We assume that costs and expenditures accrue at the beginning of 
each year. The detailed calculations and references that support the 
following analysis are available as Reference 1.
2. Costs to Manufacturers and Packagers of Affected Products
    The pharmaceutical industry would face compliance costs from this 
regulation, because we would require manufacturers, repackers, 
relabelers, and private label distributors to include NDC numbers in 
bar code format, using linear bar code symbology for all unit of dosing 
products. The final rule requires this information within 2 years of 
the implementation date. The final rule also affects the production 
processes of the pharmaceutical and biological product industries. 
Although manufacturers appear to initiate labeling changes fairly often 
for internal purposes, the final rule could lead to large-scale 
production line alterations that could affect a manufacturer's entire 
product line.
    a. Prescription drugs. Based on ERG's analysis, we expect the 
overall investment costs to the prescription drug industry to total 
$28.1 million over the first 2 years of the evaluation period. Among 
the major components of these investment costs are $17.4 million 
resulting from modifications of unit-dose interior packaging to include 
a unique NDC number in a linear bar code format for every product. 
Exterior packaging modifications that include NDC information would 
cost $6.1 million over the 2-year period. Because the capital equipment 
installed for these packaging modifications would require upgrading and 
replacement after an average 10 years of productive life, the industry 
would invest an additional $4.7 million over the 11th and 12th 
evaluation years for this replacement and upgrade. In addition, the 
packaging production process would result in additional annual 
operating and maintenance costs reaching $0.4 million by the second 
evaluation year. In total, we estimate that the costs incurred by the 
prescription drug manufacturers, repackers, and relabelers to comply 
with the final rule over the 20-year period would be $3.2 million per 
year if annualized using a 7 percent annual discount rate, and $2.5 
million if annualized using a 3 percent discount rate.
    b. Over-the-Counter drugs. The OTC drug industry has estimated that 
fewer than 10 percent of their products are commonly used in hospitals 
(CHPA, 2002). However, suppliers and hospitals have asserted that as 
many as 75 percent of OTC SKUs would at least occasionally be ordered 
for hospitals. For this analysis, we assume that 75 percent of all OTC 
drug products could be required by the rule to include bar coded NDC 
numbers. It is likely the industry would either assign internal 
production processes that could allow labeling differentiation for 
these products, or repackers and relabelers would provide the required 
labeling. We believe that the packaging changes required to install bar 
coding equipment are so large they would result in manufacturer 
decisions to bar code entire product lines rather than incremental, 
specific products. We estimate that the initial investment for OTC drug 
manufacturers, repackers, and relabelers would total $19.9 million over 
2 years, with additional capital investments of $1.5 million during the 
11th and 12th evaluation years. The estimated annual operating costs to 
provide bar codes to the affected proportion of the OTC drug market are 
expected to reach $0.3 million by the second year. Overall, the 
estimated annualized costs to the OTC drug industry, using a 7 percent 
annual discount rate over the 20-year evaluation period, are $2.2 
million. With a 3 percent annual discount rate, the annualized costs to 
OTC manufacturing firms are $1.6 million.
    c. Blood and blood components intended for transfusion. 
Manufacturers of blood and blood components intended for transfusion 
could also be minimally affected by the rule, but we could not identify 
a manufacturer of blood and blood components intended for transfusion 
that does not currently apply bar coded information that includes 
information required by this final rule. The final rule does not 
specify a particular bar code standard

[[Page 9156]]

for this market segment. Therefore, we do not believe this final rule 
will pose any incremental costs to this industry.
    d. Total cost to manufactures, repackers, relabelers, and private 
label distributors. The annualized costs to manufacturers, repackers, 
relabelers, and private label distributors of prescription products, 
OTC products, and human blood and blood components are $5.4 million 
using a 7 percent discount rate. Using a 3 percent discount rate, the 
annualized costs to manufacturers, repackers, relabelers, and private 
label distributors are $4.1 million.
3. Costs to Retailers and Distributors
    We do not expect increased costs to retailers, wholesalers, and 
distributors. Currently installed scanners and readers are able to read 
the proposed linear standard bar codes. However, if we issued an 
alternative regulation requiring specific RSS symbology, independent 
community pharmacies, chain pharmacies, and pharmacies in chain 
merchandisers or supermarkets would have had to upgrade scanners in 
order to take advantage of the proposed standardized information. Given 
the widespread reliance on bar code information in the retail sector, 
the currently installed stock of bar code scanners will not be affected 
by the rule.
4. Costs to Hospitals
    The final rule requires NDC numbers in linear bar codes on the 
labels of the affected products. However, because we expect that 
manufacturers, repackers, relabelers, and private label distributors 
may find it necessary to use RSS symbology on small unit-dose packages 
or vials and bottles, hospital scanners and readers must have the 
ability to capture this information in RSS format. As a result, in 
order for hospitals with currently installed bar code reading systems 
to maintain current operating practice, some scanners must be replaced 
with scanners that are RSS-capable. Replacement of these scanners is 
necessary to maintain current operations.
    These costs are somewhat mitigated for the approximately 2 percent 
of all hospitals (101 hospitals) that currently utilize bar codes in 
everyday practice by repackaging medications in unit-dose form and 
applying internally printed and generated bar codes. According to 
published reports and discussions with industry experts, ERG estimated 
that such hospitals now incur costs to repackage and apply bar codes to 
about 95percent of dispensed medications. These 101 hospitals would 
avoid some of these expenditures (because 25 percent of all medications 
will have useable bar codes) under the rule.
    The final rule would result in the premature replacement of 
scanners used in hospital pharmacies and treatment wards. ERG has 
estimated that the annualized, incremental costs to hospitals of 
accelerating scanner replacement or upgrades to read RSS symbology is 
$0.8 million (at a 7 percent discount rate) or $0.6 million (at a 3 
percent discount rate).
    According to literature reports, it costs as much as $0.03 per 
unit-dose to apply a bar code in hospital pharmacies. Currently, 25 
percent of dispensed medication must have bar codes applied by in-house 
pharmacy in unit-of-use packages. Avoidance of this activity under the 
final rule will reduce costs by about $0.2 million per year.
    Overall, we estimate the average annualized costs of the final rule 
less the cost savings to hospitals to be $0.6 million using a 7 percent 
annual discount rate and $0.4 million using a 3 percent annual discount 
rate.
5. Costs to the Food and Drug Administration
    According to a recent study, the number of available pharmaceutical 
products has increased by 500 percent in 10 years and now totals over 
17,000 separate trade and generic names. With the multitude of dose 
strengths and packages, the total number of unique packaging units is 
now 178,000 separate identifiable products. Of this total, we expect 
153,500 of these packaging units to require bar coded NDC numbers 
because we estimate that 75 percent of all OTC drug products will be 
affected. Even if the recent growth rate in new products were halved 
(so that the number of available products increased by 500 percent in 
20 years), there would be 890,000 new NDC codes over 20 years, or 
44,500 per year for the evaluation period.
    We expect that the requirement for notification of unique NDC 
numbers would require the development and maintenance of an accessible 
agency database. We have assumed 0.5 hours per notification to 
represent the cost to input and encode a specific NDC number and to 
maintain an accessible database containing all NDC numbers. This 
implies an annual resource requirement of 22,250 hours, or 
approximately 10 full-time equivalents (FTEs). These direct resources 
require supervision, administration, and support. To account for these 
indirect resources, we multiplied direct resources by 2, resulting in 
20 annual FTEs. The most recent FDA budget documents have used a value 
of approximately $120,000 per FTE. Therefore, we expect the annual 
costs of maintaining a system of unique NDC numbers to be $2.4 million. 
Although additional regulatory requirements, such as developing and 
operating a exemption waiver process or requiring readable bar code 
information on product labels, would increase our administrative and 
compliance burdens, we have not quantified these impacts.
6. Total Regulatory Costs
    The total direct annualized regulatory costs of the final 
regulation over the 20-year period amounts to $8.4 million using a 7 
percent annual discount rate and $6.9 million using a 3 percent 
discount rate. These costs differ from the costs estimated for the 
proposed rule because of our analyses of the proportion of affected OTC 
drug products, the human blood and blood component industry, hospital 
responses to bar codes, and a 2-year implementation period. Table 3 
shows future projections for the increased investments and operating 
and maintenance costs expected from the regulation.

             Table 3.--Regulatory Costs by Year in Millions
------------------------------------------------------------------------
                                                      Operating and
   Evaluation Year      Investment During Year       Maintenance Cost
------------------------------------------------------------------------
1                                         $32.6                     $2.6
----------------------
2                                         $24.0                     $2.9
----------------------
3                                           0                       $2.9
----------------------
4                                           0                       $2.9
----------------------

[[Page 9157]]

 
5                                           0                       $2.9
----------------------
6                                           0                       $2.9
----------------------
7                                           0                       $2.9
----------------------
8                                           0                       $2.9
----------------------
9                                           0                       $2.9
----------------------
10                                          0                       $2.9
----------------------
11                                         $3.2                     $2.9
----------------------
12                                         $3.0                     $2.9
----------------------
13                                          0                       $2.9
----------------------
14                                          0                       $2.9
----------------------
15                                          0                       $2.9
----------------------
16                                          0                       $2.9
----------------------
17                                          0                       $2.9
----------------------
18                                          0                       $2.9
----------------------
19                                          0                       $2.9
----------------------
20                                          0                       $2.9
------------------------------------------------------------------------


[[Page 9158]]

G. Other Anticipated Expenditures

    We anticipate that the final rule will affect facilities defined as 
hospitals and included in the NCHS report on Health 2002.\9\ The final 
rule would impact hospitals (NAICS 622) by encouraging them to 
accelerate the efficient use of bar code reading technology in bedside 
point of care settings. The expected increased investment would lead to 
a significant reduction in the number of ADEs and AHTRs among hospital 
patients. We assume that hospital investments in this technology occur 
at the beginning of each year.
---------------------------------------------------------------------------

    \9\ We have tried to quantify impacts on nursing and residential 
care facilities (NAICS 623) in response to comments on the proposed 
rule, but the relatively high costs of installing integrated bar 
code scanning systems and the relatively low rate of reported ADEs 
make it unlikely that the rule will affect this sector.
---------------------------------------------------------------------------

    Hospitals have long considered the application of bar code reading 
technology for their facilities. According to the American Hospital 
Association (AHA), almost half of United States hospitals have explored 
the possibility of independently installing this technology. A few 
(about 4 percent of all United States hospitals) are currently using 
some form of computerized systems in their medication processes, and 
half of them use bar codes in everyday practice. However, because 
hospitals currently have no standardized bar coded information for all 
therapeutic products, each hospital must generate and internally affix 
bar codes that are applicable only within that specific facility. In 
some cases, hospitals overpackage drug products in order to make 
current scanning systems usable. This extra effort reduces the expected 
efficiency of the bar code reading systems, introduces potential 
errors, and has been a barrier to the general acceptance of readable 
technology. Standardized universal codes would remove this impediment 
and encourage health care facilities to invest and use technology to 
reduce patient ADEs and AHTRs.
    Hospital facilities will face significant capital investments and 
significant process changes in order to implement bar code reading and 
scanning technology. ERG estimated that the average initial cost to a 
typical hospital for the installation of scanners, readers, software, 
initial training etc. is $448,000.\10\ In addition, although there is 
considerable uncertainty, hospital industry executives and consultants 
contacted by ERG agree that negative productivity effects are likely 
after installation of a bar code reading system. These contacts noted 
that using scanners could result in reductions in patient ward 
productivity because current scanners and administration procedures 
would have to be revised to accommodate the technology. Difficulties 
could arise, for example, when multiple doses of medication are 
required at the same time for different patients; or when current 
administrative practices, such as pre-preparing certain medication, 
could not be accommodated with the bar code reading systems. Also, 
moving the scanner and reader from room to room, not adequately reading 
the bar code on one swipe, and other procedural changes might result in 
operational inefficiencies. It is possible (and hopeful) that long-term 
process changes would moderate or eliminate these potential 
inefficiencies. While some consultants believed that bar code systems 
would ultimately be resource neutral, the most detailed analysis of the 
VA system (Ref. 10) estimated a 10 percent loss of nursing productivity 
after implementing a bar code system. Our analysis assumes that 
hospital ward productivity levels would fall by 3 percent annually over 
the evaluation period. We examine the effects of alternative 
assumptions in section VII.O below. The annual opportunity costs of 
these productivity losses, together with the operation and maintenance 
expenses, amount to $556,000 per year for the average sized hospital. 
(Operating costs are slightly higher if installed systems are unable to 
take advantage of required bar codes on labels). Some of these expected 
productivity losses would be mitigated by efficiency gains in other 
hospital procedures as discussed later.
---------------------------------------------------------------------------

    \10\ Per hospital expenditures and benefits are based on an 
average sized hospital based on bed capacity. The average United 
States hospital has 170 beds (NCHS, 2002).
---------------------------------------------------------------------------

    Despite these costs, interviews with consultants in the field of 
health care technology indicate that hospitals are gradually making 
this commitment. Experts have predicted that even in the absence of 
this regulation, hospitals would likely install bar code readable 
technology within 20 years. Therefore, we believe that while only about 
101 hospitals currently use bar codes in everyday operations, the 
remaining 4,939 hospitals would ultimately invest in this technology. 
These experts have also predicted, however, that if standardized bar 
code information on medications were available to allow scanning 
systems to capture information without requiring in-facility labeling 
systems, many hospitals would be swayed to make these investments much 
earlier. Thus, we believe that the regulation would effectively prompt 
facilities to accelerate these investments.
    Based on ERG's discussions with industry consultants, we predict 
that the rule could double the rate of hospital investment in this 
technology, thereby achieving the installation of complete systems 
within 10 years. For example, for those hospitals that now expect to 
acquire bar code systems within 10 years, we assume the availability of 
standardized bar codes on medications would accelerate the purchase to 
within 5 years. The cost to the hospital of this accelerated investment 
expenditure is the opportunity cost of the investment capital for 5 
years (the difference between making the investment in year 5 as 
opposed to year 10) as well as the 5 additional years of maintenance 
expenses and productivity losses. In addition, industry experts suggest 
that systems of bar code readers and scanners would require software 
and equipment upgrades within 10 years of installation. For the example 
facility, the installed system would require upgrades during the 15th 
project year under the accelerated investment, whereas upgrades would 
not occur until the 20th year in the absence of regulation. We 
acknowledge that precise estimates of the rate of acceleration of 
technology acceptance are uncertain. However, industry experts 
indicated that doubling the rate of technology acceptance was not an 
unreasonable assumption. Alternative rates of acceptance were compared 
and discussed as a sensitivity analysis.
    ERG used a probit pattern of adopting bar code reading technology. 
That is, the percentage of hospitals adopting the technology is modeled 
as a standard normal cumulative distribution with 0 percent adoption in 
year 0 and 100 percent adoption in year 20. The standard deviation of 
the distribution is chosen to ensure at least 1 adoption during the 
first year. This function has been used to describe rates of technology 
acceptance for other new products. In the hospital sector, for example, 
a study of medical technology infusion noted that complete unit dose 
systems, complete IV (intravenous) admixture systems, and computerized 
prescribed order entry (CPOE) systems have been accepted in this manner 
(Ref. 11). Consequently, for the 20-year period, FDA estimates the PV 
of the costs of the accelerated investment in bar coding technology by 
hospitals, including the annual operating expenses and productivity 
losses, to be $7.0 billion (7 percent) or $9.0 billion (3 percent). The 
estimated annualized cost is $657.2 million (7 percent) or $602.9 
million (3 percent). As discussed in

[[Page 9159]]

section VII.F.4, the regulation would reduce hospital operating costs 
because pharmacies would not apply in-house bar codes. In baseline, 
hospitals installing bar code systems would incur these expenses. 
Therefore, we expect that by the 17th year, annual operating costs for 
this industry will be lower than those that would occur in the absence 
of the regulation. Table 4 shows the annual incremental expenditures 
for adopting hospitals expected under the final regulation.

Table 4.--Expected Incremental Hospital Expenditures by Year in Millions
------------------------------------------------------------------------
                                                             Incremental
                                                               Cost to
                      Evaluation Year                         Hospitals
                                                               Adopting
                                                              Bar Codes
------------------------------------------------------------------------
1                                                              $0.8
------------------------------------------------------------
2                                                             $13.5
------------------------------------------------------------
3                                                            $102.8
------------------------------------------------------------
4                                                            $426.8
------------------------------------------------------------
5                                                            $1,039.3
------------------------------------------------------------
6                                                            $1,624.0
------------------------------------------------------------
7                                                            $1,852.3
------------------------------------------------------------
8                                                            $1,751.9
------------------------------------------------------------
9                                                            $1,478.0
------------------------------------------------------------
10                                                           $1,129.6
------------------------------------------------------------
11                                                           $772.4
------------------------------------------------------------
12                                                           $466.6
------------------------------------------------------------
13                                                           $243.0
------------------------------------------------------------
14                                                           $104.9
------------------------------------------------------------
15                                                            $32.6
------------------------------------------------------------
16                                                             $0.5
------------------------------------------------------------
17                                                           ($11.6)
------------------------------------------------------------
18                                                           ($17.0)
------------------------------------------------------------
19                                                           ($17.5)
------------------------------------------------------------
20                                                           ($17.7)
------------------------------------------------------------------------
( ) indicates cost reduction from baseline to account for decreased in-
  house packaging.

H. Reduction in Preventable Adverse Drug Events and Preventable Acute 
Hemolytic Transfusion Reactions

    The benefits of the rule are focused on the reductions in ADEs and 
AHTRs that would follow the earlier use of bar code reading technology 
and bar coded drug products. We have not quantified all the other 
institutional benefits of computerized systems and medical informatics, 
but have estimated a potential range of efficiency gains. Any ADEs 
avoided during a year are analyzed as if they occur at the end of the 
year.
    ERG determined that under current conditions, about 1.25 million 
ADEs occur each year in the United States, of which 373,000 are 
preventable. As discussed above, the regulation would substantially 
reduce the number of ADEs caused by errors originating in the 
dispensing and administration of pharmaceutical or blood products in 
hospitals. Studies of medication errors in hospitals that have 
installed bedside bar coding and use internally applied labels show 
error interception rates of from 70 percent to 85 percent (Refs. 12 to 
15 and 28). Other industry experts, however, suggest that those 
published interception rates would not be as high if the technology 
were widely dispersed, because of the likelihood of events such as lost 
wristbands, erroneous bar codes, or intentional system bypasses. 
Therefore, FDA and ERG have assumed that bar code system use would 
produce no reduction in prescribing and transcribing errors, but that 
its use would intercept one-half of the 45.1 percent of all preventable 
ADEs that now originate in the dispensing and administration stages of 
the medication process. Thus, ERG assumed that, if all hospitals 
adopted bar code systems, the number of preventable ADEs would fall by 
22.6 percent (45.1 x 0.5), which would currently prevent about 84,300 
ADEs per year (373,000 x 0.226). This equals a reduction of 16.7 
preventable ADEs per year for an average hospital. Section VII.O below 
addresses the effect of alternative assumptions. Given projected 
increases in hospital admissions, within 20 years, we expect 543,000 
preventable ADEs in the absence of this regulation. This analysis 
suggests that this regulation would prevent 123,000 ADEs, or 24.5 per 
hospital during the 20th evaluation year. We believe the assumption 
that bar code readers could intercept one-half of dispensing and 
administration errors is reasonable and conservative, but specifically 
tested this assumption as a sensitivity analysis.
    Errors occur during any of the numerous steps in the production and 
delivery of blood and blood components. Several studies (Refs. 8, 16, 
and 27) have estimated that approximately 55 percent of transfusion 
errors occur in patient areas and originate from phlebotomy errors or 
incorrect patient identification. The machine readable information 
required on human blood products will be readable by installed systems. 
We expect bedside bar code systems to intercept 75 percent of these 
errors based on published case studies of interception rates that vary 
between 50 and 100 percent. Therefore, installation of bar code systems 
in hospitals is expected to prevent 114 AHTRs (276 x 0.55 x 0.75), or 
0.023 per hospital. During the 20th evaluation year, bar code systems 
are expected to prevent 206 AHTRs (0.041 per hospital).
    We estimate that the final rule, by stimulating earlier hospital 
investment in bar code scanning systems, will reduce ADEs and AHTRs. To 
project the aggregate number of ADEs and AHTRs avoided due to the final 
rule, ERG calculated the number of ADEs and AHTRs per hospital that 
would be avoided by bar coding systems and multiplied that number by 
the additional number of hospitals that would use bar coding reading 
systems during each year of the evaluation period. For example, during 
the 10th evaluation year, our model predicts that 2,469 more hospitals 
would have installed bar code reading systems than would have installed 
them in the absence of the rule. The additional hospitals using bar 
codes during the 10th year would intercept an estimated 52,600 errors, 
taking into account expected increases in admissions as well (21.3 ADEs 
per hospital x 2,469 hospitals), that would otherwise have resulted in 
ADEs during that year. In addition, there would be 75 fewer AHTRs 
because of the increased use of bar code systems during that year. Over 
the entire evaluation period, this methodology predicts that the 
accelerated investment would avoid over 501,300 ADEs and 700 AHTRs.

I. Value of Avoided ADEs and AHTRs

1. Value of Avoided ADEs
    Estimating benefits requires estimating the value of the avoided 
ADEs and AHTRs. FDA and ERG estimated two values of avoided preventable 
ADEs. First, ERG estimated the avoided direct hospital costs needed to 
cover additional tests, longer patient stays, and other direct 
expenses. Based on published studies, the estimated average direct cost 
of an ADE not attributable to prescribing error is $2,257 (Refs. 3, 5 
and 29). This figure represents a weighted average of direct hospital 
costs over all degrees of ADE severity and does not include patient 
pain and suffering or liability. Second, ERG and FDA estimated the 
monetized value of avoiding decreases in quality-adjusted life years 
(QALYs) due to ADEs. This latter approach attempts to value a patient's 
subjective ADE experience, including inconvenience,

[[Page 9160]]

pain and suffering, foregone earnings, and other out-of-pocket costs.
    ERG examined the literature to determine the probability 
distribution of specific symptoms associated with ADEs. These reported 
symptoms range from rashes and itching to cardiac arrhythmia, renal 
failure, and mortality. The duration of each symptom (additional length 
of hospital stays) ranged from about 0.7 days to 5.5 days (except for 
mortality). ERG then examined reported preference scores from the 
Harvard Center for Risk Analysis' (HCRA) Catalog of Preference Scores, 
which includes a survey of the health economics literature and presents 
published estimates of preferences for defined symptoms. The preference 
scores ranged from 0.95 (for significant but not serious ADEs) to 0.00 
for death. Typical symptoms encountered with serious ADEs had a 
preference score of 0.8, while life-threatening ADEs had a derived 
preference score of 0.6. We note that the reported preference scores 
vary widely by definition and methodology and must be interpreted with 
great caution.
    ERG calculated the change in QALYs expected from an avoided ADE as 
1 minus the preference score multiplied by the duration of the event. 
For example, minor drug toxicity (such as a rash) has a derived 
preference score of 0.95 and a reported duration of 2 days (0.005 
years). The change in QALYs expected for such an event is 0.05 (1 minus 
0.95) x 0.005, or 0.0003 QALYs. There is no consensus on the best means 
of valuing QALYs or the best estimates of willingness-to-pay for QALYs. 
One approach is to derive the value from studies that estimate the 
willingness-to-pay to avoid a statistical mortality risk. For example, 
values derived from occupational wage-premiums to accept measurable 
work-place risk are about $2 million to $10 million per statistical 
death avoided, with a typical estimate of about $5 million. 
Apportioning this value over the remaining life expectancy of the 
average workforce member and adjusting for future disability implies 
(at 7 percent discount rate) a value per QALY of about $373,000. If 
using a 3 percent discount rate, the adjusted value per QALY is 
estimated at about $213,000. Thus, in the example above, the value of 
the decrease in QALYs due to minor drug toxicity would be $102 (7 
percent) or $64 (3 percent).
    ERG examined the literature and found that by combining several 
published accounts, 36.1 percent of the outcomes associated with 
preventable ADEs were deemed significant, 41.7 percent were deemed 
serious, 19.4 percent were deemed life threatening (of which 10 percent 
[or 1.9 percent of the total] resulted in permanent conditions), and 
2.8 percent resulted in fatalities. Overall, these assumptions indicate 
that the weighted average preference value for each avoided preventable 
ADE is $183,500 with a 7 percent annual discount rate. A 3 percent 
annual discount rate would indicate a weighted average preference value 
of $181,600. The derived values are similar because the contribution of 
avoided mortality. We note that these values are very sensitive to the 
number of fatal preventable ADEs.
2. Value of Avoided AHTRs
    As for ADEs, AHTRs caused by erroneous transfusions might lead to 
additional laboratory tests, extended hospital stays, and other direct 
costs. ERG judged that these direct additional hospital costs would be 
equivalent to those for ADEs and estimated them to equal $2,257 per 
AHTR.
    To estimate the monetary value of a change in QALYs resulting from 
erroneous transfusions, ERG examined the range of potential reactions 
experienced by patients that receive ABO-incompatible blood. As 
reported in two studies (Refs. 7 and 27), almost half (47 percent) of 
patients suffer no ill effects, and 3 percent of patients may die due 
to an underlying condition. Most of the remaining half of patients may 
experience fever, chills, chest pain, nausea or other relatively mild 
symptoms for short durations. However, an AHTR may occasionally lead to 
acute renal failure or death. The weighted average preference value for 
each avoided AHTR is $101,200 using either 7 percent or 3 percent 
discount rate. As for ADEs, this estimate is dominated by the high 
value placed on mortality avoidance.

J. Aggregate Benefit of Avoiding ADEs and AHTRs

    FDA and ERG estimated the benefit of avoiding ADEs and AHTRs due to 
the use of bar code reading systems by multiplying the value of each 
avoided preventable ADE and AHTR by the expected number of ADEs and 
AHTRs avoided. As stated earlier, an average hospital is expected to 
have fewer preventable ADEs and fewer preventable AHTRs each year under 
current conditions after installing bar code reading technology. Within 
20 years, these systems are expected to avoid 24.5 ADEs and 0.041 AHTRs 
per hospital because of increased admissions. The direct cost savings 
by avoiding treatment ($2,257 per ADE or AHTR) and the weighted 
preference values ($183,500 per ADE and $101,200 per AHTR) indicate a 
societal value of $185,800 per average ADE avoided and $103,500 per 
average AHTR avoided (using 7 percent discount rate), and a societal 
benefit of about $3.48 million per facility during the first evaluation 
year. We multiplied this derived value per hospital by the expected 
difference in the number of hospitals with installed bar code 
technology under the rule. For example, during the 10th evaluation 
year, an estimated 2,469 additional hospitals would have installed bar 
code reading systems due to the rule. We would expect the increased use 
of these systems to result in 51,500 fewer ADEs and 71 fewer AHTRs than 
in the absence of the regulation. The estimated PV of avoiding these 
ADEs and AHTRs during the 10th year is $4.9 billion (7 percent) or $7.1 
billion (3 percent). The PV of the societal benefits that would result 
from reductions in ADEs and AHTRs over the entire 20-year evaluation 
period is $54.8 billion (7 percent). The annualized societal benefit of 
the reduced number of ADEs and AHTRs is $5.2 billion at 7 percent 
annual discount rate. Table 5 illustrates the expected reduction in 
ADEs and AHTRs for the entire evaluation period. The PV for AHTR 
avoidance alone is $42.2 million and annualized at $4.0 million at 7 
percent.

 Table 5.--Expected Reduction in ADEs and AHTRs by Year with Bar Code Societal Benefits in Millions (7 percent)
----------------------------------------------------------------------------------------------------------------
                               Additional ADEs    Additional AHTRS                          Monetized Benefit of
       Evaluation Year             Avoided            Avoided           Gain in QALYS        Avoided ADEs/AHTRs
----------------------------------------------------------------------------------------------------------------
1                                            37                  0                 57.7                   $6.8
-----------------------------
2                                           595                  1                928.4                 $110.6
-----------------------------

[[Page 9161]]

 
3                                         4,566                  6              7,129.2                 $849.2
-----------------------------
4                                        18,171                 25             28,369.0               $3,378.8
-----------------------------
5                                        46,364                 64             72,384.5               $8,621.1
-----------------------------
6                                        72,898                101            113,808.7              $13,554.8
-----------------------------
7                                        83,230                115            129,938.8              $15,476.0
-----------------------------
8                                        79,083                110            123,464.9              $14,704.9
-----------------------------
9                                        66,933                 93            104,495.8              $12,445.7
-----------------------------
10                                       51,528                 71             80,445.8               $9,581.3
-----------------------------
11                                       35,521                 49             55,455.9               $6,604.9
-----------------------------
12                                       21,828                 30             34,078.4               $4,058.8
-----------------------------
13                                       11,732                 16             18,316.0               $2,181.5
-----------------------------
14                                        5,493                  8              8,575.2               $1,021.3
-----------------------------
15                                        2,232                  3              3,484.2                 $414.9
-----------------------------
16                                          774                  1              1,208.6                 $143.9
-----------------------------
17                                          239                  0                373.5                  $44.4
-----------------------------
18                                           58                  0                 90.3                  $10.7
-----------------------------
19                                           12                  0                 18.3                   $2.2
-----------------------------
20                                            0                  0                  0                     $0
-----------------------------
Total                                   501,294                693            782,623.2              $93,211.8
----------------------------------------------------------------------------------------------------------------

    Using a 3 percent discount rate, the PV of avoided ADEs and AHTRs 
totals $73.0 billion with an average annualized equivalent of $4.9 
billion. The benefit attributable to avoided AHTRs alone has a PV of 
$56.8 million and an annualized value of $3.8 million using 3 percent 
annual discount rate.

K. Cost Effectiveness of Bar Coding

    In order to estimate the value of each ADE or AHTR avoided, ERG 
estimated the decrease in QALYs that would be expected from each event. 
As discussed in section VII.I.1, each ADE or AHTR avoided represents a 
weighted average of potential outcomes. The weighted average decrease 
in QALYs for an ADE was 1.56 QALYs and 0.87 for each AHTR. These 
estimates imply that each avoided ADE would contribute 1.56 QALYs to 
the public. As shown in Table 5, over the entire course of the 
evaluation period, the number of avoided ADEs and AHTRs account for 
782,623.2 QALYs gained. The PV of these QALYs gained equals 460,508 
using a 7 percent discount rate and 618,861 using a 3 percent discount 
rate.
    Table 6 shows the cost-effectiveness per QALY gained at various 
discount rates. The costs used to estimate the effectiveness include 
the direct regulatory costs as well as increased expenditures by 
hospitals. Cost-effectiveness shows that the regulation will require 
costs of between $9,000 and $15,000 for each additional QALY gained.

              Table 6.--Cost Effectiveness per QALY Gained
------------------------------------------------------------------------
                                 Cost-Effectiveness   Cost-Effectiveness
                                    at 7 percent         at 3 percent
------------------------------------------------------------------------
Undiscounted QALYs              $9,009               $11,595
-------------------------------
QALYs Discounted at 7 percent   $15,311              N/A
-------------------------------
QALYs Discounted at 3 percent   N/A                  $14,663
------------------------------------------------------------------------
Note: Present value of costs are divided by the gain in QALYs. For
  example, the present value of costs using a 7 percent discount rate is
  approximately $7.05 billion. This amount, when divided by
  approximately 782,600 QALYs, results in $9,009 per QALY ($9,008.43,
  rounded up to $9,009).


[[Page 9162]]

L. Other Benefits of Bar Code Technology

    The availability of standardized bar codes would result in 
additional benefits to patients and the health care sector. As bar 
codes are an enabling technology, their adoption for hospital patient 
care would foster their use in other hospital and non-hospital 
settings. With automated systems, hospitals would no longer need to 
repackage and self-generate bar codes. Hospital pharmacies and wards 
would likewise take advantage of the availability of bar coded products 
to generate new production efficiencies for activities such as 
reporting, record keeping, purchasing, and inventory controls. For 
example, integrated scanning systems may allow for electronic versions 
of daily Medication Administration Records (MARs) and pharmacy 
reconciliation reports. According to industry experts, if these 
activities could be avoided by automatically generating the records, an 
average sized hospital could save as many as 397 hours of pharmacist 
resources and 5,694 hours of nursing resources each year. The estimated 
annual efficiency savings of avoiding these opportunity costs equals 
$218,300 for an average hospital. Moreover, ERG and FDA believe the 
identified potential gains from electronic MAR and reconciliation 
reports may account for only between 50 and 80 percent of the potential 
gains in these areas. Discussions with several hospital administrators 
indicate that integrated bar code systems could result in reduced 
``hallway'' time and improved communication. For example, nurses will 
spend less time walking between a patient and the nursing station to 
resolve discrepancies, and a bar code system would require complete 
consistency of medication orders between pharmacy and nursing staffs. 
In addition, bar code technology may achieve efficiencies in other 
laboratories as well. If so, the total estimated annual efficiency 
gains to an average hospital would range from $272,900 to $436,600 from 
use of bar code scanners in pharmacies and patient care wards. If such 
gains were obtainable, the PV of these gains for the sector as a whole 
would be between $4.0 billion and $6.4 billion with a 7 percent annual 
discount rate. The PV of this potential gain would be between $5.3 
billion and $8.5 billion if a 3 percent discount rate is used in the 
calculation. The average annualized gains of these potential 
efficiencies are between $376.3 million and $602.0 million (at 7 
percent), or $359.0 million and $574.2 million (at 3 percent).
    The final rule could also increase the use of medical informatics 
in locations other than hospitals. Health care facilities such as 
physician offices, nursing homes, long-term care facilities and home 
health delivery systems would be more likely to adopt bar coding and 
scanning systems to safeguard the use of patient medications and 
achieve additional efficiencies. However, ERG's analysis of the 
adoption of bar code technology in nursing homes and long-term care 
facilities does not indicate a rapid adoption at this time.
    According to the AHCA, there are 16,456 nursing homes in the United 
States. ERG estimates the initial investment for an average nursing 
home to install a bar code system to be $221,400 and to have annual 
operating, maintenance, and net efficiency costs of $67,000. Most costs 
are for purchasing laptop computers for nursing wards as well as 
training costs. The major study of preventable ADEs in nursing homes 
(Ref. 17) has estimated that there are only 10,373 preventable ADEs per 
year in nursing homes attributable to dispensing or administration, or 
less than 0.67 preventable ADEs per facility. If the use of a bar code 
system could intercept 50 percent of these ADEs, the benefit per 
facility per year would equal 0.32 ADEs. There are strong indications 
that these estimates of prevented ADEs are conservative because the 
study is based on voluntary reporting.
    Comparisons between the drug classes associated with ADEs in 
nursing homes (Refs 17 and 18) and those in hospitals resulted in a 
distribution of expected outcomes of ADEs different than those in 
hospitals. For example, Bates (Ref. 2) found that 38 percent of all 
preventable ADEs were associated with analgesics and antibiotics, while 
in nursing homes, only 13 percent of all ADEs were associated with 
these drug classes. Using the distribution of drug classes associated 
with preventable ADEs in nursing homes, the weighted average value of a 
prevented nursing home ADE was $43,200 (7 percent) and $63,700 (3 
percent). These estimated values are based on very limited analyses 
conducted to date in nursing homes.
    Forecasted adoption rates for nursing homes resulted in PV of costs 
of $3.8 billion and PV of benefits of only $0.5 billion (7 percent). At 
3 percent the PV of costs to nursing homes was $4.9 billion while the 
PV of ADE avoidance was only $0.6 billion. With profit margins so 
slight in this industry, we do not believe the technology will be 
rapidly adopted at this time in spite of the accessibility of bar coded 
products. We emphasize the current scarcity of data on ADEs in nursing 
homes. The definition of ``preventability'' used to analyze ADEs in 
hospitals may not transfer to these settings, which may severely under 
estimate the potential benefit. However, we cannot project impacts of 
this rule for this industry at this time.

M. Distributional Effects of Bar Code Technology

    Bar code usage would likely result in distributional transfers 
between sectors of society. For example, bar code use could reduce 
hospital payments due to punitive damage awards from potential 
lawsuits. According to legal data bases (Ref. 19), there were 
approximately 35,000 personal-injury and malpractice claims per year 
between 1995 and 2000 in the health care sector. Approximately half of 
these claims were for pregnancies with the remainder including surgical 
claims, misdiagnosis, and medication errors. If these claims are 
distributed equally by type (surgical, diagnosis, or medication errors) 
and sector (inpatient or outpatient), we estimate that about 600 legal 
claims per year are potentially associated with preventable ADEs in 
hospitals. This implies that only 0.2 percent of all preventable ADEs 
are likely subject to legal claims (600 divided by 373,000). The 
average jury award for damages from medication errors was $636,800 in 
2000, although only 40 percent of cases were decided for plaintiffs. 
Estimated average pre-trial settlements for malpractice claims in 2000 
totaled $318,400. We do not have data on the proportion of settlements, 
but have assumed 80 percent of claims are settled prior to trial. If 
so, the average likely award per preventable ADE is $492. Current bar 
code systems are expected to avoid 16.7 ADEs per year in an average 
hospital. This implies an average reduction in annual legal awards of 
$8,200 per hospital and $41.4 million for all hospitals. Fewer awards 
would result in lower malpractice insurance premiums, which would 
reduce other hospital expenditures. The General Accounting Office (Ref. 
20) reported hospital malpractice insurance rates ranging between $511 
and $7,734 per bed depending on location. Recent reports have suggested 
that annual premiums have increased to about $4,228 to $11,435 per bed 
(Ref. 21). Although only a weak relationship has been established 
between negligent acts and the incidence of malpractice claims (Refs. 
22 to 24), we attempted to estimate the potential size of any impact on 
premiums. Rothchild et al (Ref. 25) estimated that only 6.3 percent of 
all malpractice claims were the result of ADEs. Given the distribution 
of ADEs in

[[Page 9163]]

the medication process, we expect a 50 percent reduction in ADEs caused 
by distribution and administration errors to reduce premiums by 0.55 
percent, or $49 per bed to the average hospital. The total expected 
saving would be $8,330 per hospital and $42.0 million for all 
hospitals. While reductions in legal settlements or liability insurance 
premiums represent transfers between hospitals, third-party payers, 
attorneys, and patients and are not opportunity gains or losses, such 
reductions could increase the efficient allocation of resources by 
sector.
    Bar code systems may also increase hospital revenues by improving 
the ``cost capture rate.'' One published study (Ref. 26) reported the 
cost capture rate (the ratio of billed uncontrolled pharmaceuticals to 
all pharmaceuticals used) increased from 63 percent to 97 percent after 
installation of computerized systems in nursing wards. According to the 
authors, this would imply an increase in revenues of about $65,000 per 
year for an average hospital. While such accounting improvements are 
transfers from patients and third-party payers to hospitals rather than 
reduced opportunity costs, this practice illustrates the potential use 
of bar code scanning systems in increasing the efficient allocation of 
resources by sector. Other potential transfers may include avoidance of 
certain billing errors or increased timeliness of payment.

N. Comparison of Costs, Expenditures, and Benefits

    The increase of over 780,000 QALYs over the evaluation period as a 
result of avoiding over 500,000 ADEs and AHTRs has a monetized present 
value of $54.8 billion (discounting at 7 percent) and $73.0 billion 
(discounting at 3 percent). This section compares the expected benefits 
of the regulation to the costs and expected expenditures discussed 
earlier.
    The annualized costs of the final rule to the manufacturing, 
packaging, and labeling sectors totals $5.4 million (7 percent) or $4.1 
million (3 percent). Hospitals would be required to incur an annualized 
cost of $0.6 million to continue current operating practices (7 
percent) or $0.4 million (3 percent). FDA's resource costs to support 
the regulation equal an estimated $2.4 million per year. Thus, we 
estimate the annualized regulatory cost of the regulation to be $8.4 
million (7 percent) and $6.9 million (3 percent). In addition, we 
expect the rule to spur earlier investment by hospitals in bedside 
point-of-care systems that read bar coded labels. The annualized 
opportunity cost of this accelerated investment in technology is $660 
million (7 percent) for the entire industry, or $600 million with a 3 
percent discount rate. Table 7 presents, by sector, the present value 
of the estimated regulatory costs, the annual costs expected at the end 
of the 20-year evaluation period, and the annualized costs over the 
entire evaluation period for both discount rates. The estimated 
reduction in hospital operating expenses results from the assumption 
that hospitals could eliminate in-house labeling operations once 
products have uniform bar code information.

                        Table 7.--Costs and Other Expected Expenditures of the Final Rule
----------------------------------------------------------------------------------------------------------------
                                                          Present Value   Annual Operating Costs    Annualized
                    Industry Sector                         of Costs         at End of Period          Costs
----------------------------------------------------------------------------------------------------------------
(in millions of dollars; 20-year evaluation period; 7-percent discount rate)
----------------------------------------------------------------------------------------------------------------
Prescription Drugs                                               $33.6                  $0.4               $3.2
--------------------------------------------------------
OTC Drugs                                                        $23.3                  $0.3               $2.2
--------------------------------------------------------
Blood Products                                                   N/A                   N/A                N/A
--------------------------------------------------------
Sub-Total Manufacturers                                          $56.9                  $0.7               $5.4
--------------------------------------------------------
Hospital Regulatory                                               $6.4                (-$0.2)**            $0.6
--------------------------------------------------------
Sub-Total Private Sector Regulatory Costs                        $62.3                  $0.5               $6.0
--------------------------------------------------------
FDA Oversight                                                    $25.4                  $2.4               $2.4
--------------------------------------------------------
TOTAL REGULATORY COSTS                                           $87.7                  $2.9               $8.4
--------------------------------------------------------
EXPECTED EXPENDITURES FROM HEALTH CARE SECTOR                 $6,961.6               (-$17.7)**          $657.2
--------------------------------------------------------
(in millions of dollars; 20-year evaluation period; 3-percent discount rate)
----------------------------------------------------------------------------------------------------------------
Prescription Drugs                                               $37.0                  $0.4               $2.5
--------------------------------------------------------
OTC Drugs                                                        $23.8                  $0.3               $1.6
--------------------------------------------------------
Blood Products                                                   N/A                   N/A                N/A
--------------------------------------------------------
Sub-Total Manufacturers                                          $60.8                  $0.7               $4.1
--------------------------------------------------------
Hospital Regulatory                                               $5.5                (-$0.2)**            $0.4
--------------------------------------------------------
Sub-Total Private Sector Regulatory Costs                        $66.3                  $0.5               $4.5
--------------------------------------------------------
FDA Oversight                                                    $35.7                  $2.4               $2.4
--------------------------------------------------------
TOTAL REGULATORY COSTS                                          $102.0                  $2.9               $6.9
--------------------------------------------------------

[[Page 9164]]

 
EXPECTED EXPENDITURES FROM HEALTH CARE SECTOR                 $8,971.4               (-$17.7)**          $602.9
----------------------------------------------------------------------------------------------------------------
*Less that $0.05 million
**Hospital operating costs decrease due to fewer in-house packaging and bar coding operations

    As discussed above, we estimate the annualized public health 
benefit to be $5.2 billion (7 percent) and $4.9 billion (3 percent). 
This estimate includes the societal value of the avoided ADEs and AHTRs 
as well as the reduced hospital stays expected due to the earlier use 
of bar code reading technology. We estimate other indirect potential 
benefits, such as efficient inventory control, patient tracking, 
electronic generation of daily reconciliation and medication reports, 
or other administrative gains, to contribute an annualized amount of 
between $376.3 and $602.0 million in efficiency gains to hospitals (7 
percent) and between $359.0 and $574.2 million (3 percent). The likely 
distributional effects of revenue enhancement, other cost capture 
measures, or reduced legal costs are not included in this comparison.
    If all costs and expenditures are combined, the annualized outlays 
total $665.6 million (7 percent) and $609.8 million (3 percent). The 
expected annualized public safety benefit of over $5.2 billion (7 
percent) and $4.9 billion (3 percent) far outweighs these outlays. 
Thus, the annual net benefits for the entire evaluation period are 
between $4.5 billion (7 percent) and $4.3 billion (3 percent). The 
expected cost effectiveness varies between $9,000 and $15,300 for each 
QALY gained, depending on the discount rate used. Moreover, this 
calculation does not account for the potential efficiency gains as 
described above.

O. Uncertainty and Sensitivity

    We recognize that the expected impacts of the regulation are based 
on a large number of uncertain assumptions. We attempted to account for 
this uncertainty by examining the key assumptions in the analysis. 
Table 8 summarizes the results of our analyses.

                            Table 8.--Summary of Uncertainty and Sensitivity Analyses
----------------------------------------------------------------------------------------------------------------
                            Base Case         Alternative     Effect on Annualized Net    Total Annualized Net
       Variable             Assumption         Assumption       Benefits (7 percent)       Benefit (millions)
----------------------------------------------------------------------------------------------------------------
Voluntary Share of      50 percent         None               -$2.1 million             $4,498.00
 Labeling Costs
-----------------------
                        50 percent         100 percent        +$2.1 million             $4,502.00
-----------------------
Impact of Regulation    N/A                N/A                No Impact Expected        $4,500.00
 On Unit of Use
 Package
-----------------------
Implementation Period   2 Years            1 Year             -$0.1 million             $4,500.00
-----------------------
                        2 Years            3 Years            +$0.1 million             $4,500.00
-----------------------
Mortality Probability   2.8 percent        1.0 percent        -$2.6 billion             $1,900.00
 With ADE
-----------------------
                        2.8 percent        0.1 percent        -$3.8 billion             $700.00
-----------------------
Value of QALY/VSL       $373,000/QALY      $100,000/QALY      -$3.2 billion             $1,300.00
                        $5 million/VSL     $2 million/VSL
-----------------------
Boundary Analysis       N/A                N/A                Breakeven point requires  N/A
                                                               gain of 103 years of
                                                               hospital use of bar
                                                               code technology as
                                                               compared to baseline
-----------------------
Hospital Rate of        20 year baseline   30 year baseline   -$1.3 billion             $3,200.00
 Adoption of Bar Code   10 year with       20 year with
 Systems                 regulation         regulation
-----------------------
                        20 year baseline   20 year baseline   -$2.9 billion             $1,600.00
                        10 year with       15 year with
                         regulation         regulation
-----------------------
Increase in             50 percent         20 percent         -$3.1 billion             $1,400.00
 Interception Rate
 Attributable to Bar
 Codes
-----------------------
                        50 percent         80 percent         +$3.1 billion             $7,600.00
-----------------------
Loss of Nursing         3 percent          1 percent          +$420 million             $4,900.00
 Productivity
-----------------------

[[Page 9165]]

 
                        3 percent          5 percent          -$520 million             $4,000.00
-----------------------
Small Hospital          N/A                N/A                Annual net benefits of    N/A
 Adoption                                                      adoption of bar code
                                                               systems for hospitals
                                                               with 50 or fewer beds
                                                               estimated at $47,000
                                                               per hospital.
----------------------------------------------------------------------------------------------------------------

1. Voluntary Share of Labeling Costs
    The costs attributable to the final rule are the incremental costs 
above what the industry would incur in the normal course of business. 
As briefly discussed earlier, many drug products change labels, on 
average, as often as once a year for marketing or design reasons. The 
ERG estimate, however, assumes that 50 percent of the required labeling 
costs would be attributable to the final rule, due to the production 
process changes that would be required to use bar coding equipment. In 
addition, we believe that market driven label changes are not 
completely comparable to regulatory required changes. We reviewed the 
sensitivity of this assumption by examining the impact that would occur 
if no required re-labeling costs were attributable to the regulation or 
all re-labeling costs were attributable to the final rule. ERG found 
that these scenarios altered the current estimate of $5.4 million in 
annualized costs for manufacturers, repackers, relabelers, and private 
label distributors (7 percent) to a range of from $3.3 million (if all 
costs are considered voluntary) to $7.5 million (if no additional 
labeling costs are considered voluntary). Using a 3 percent discount 
rate, the annual labeling costs to manufacturers could vary from 
between $2.6 million and $6.1 million.
2. Packaging Decisions
    We are sensitive to industry packaging decisions and asked our 
contractor to specifically assess the impact of the regulation on the 
future of unit-dose packaging (e.g. blister packs) trends. The concern 
was whether bar code printing would reduce the use of unit-dose 
packaging, because it would add more to its cost than to other formats. 
In general, ERG found that although the overall demand for the product 
is inelastic, the demand for a particular package type is more elastic, 
in that it is affected by relative prices to a greater degree. Industry 
contacts, however, noted that this impact is moderated because 
consumers of some OTC drug product are accustomed to blister packs, and 
manufacturers could lose market share if they abandon this format. 
Also, many hospitals require drug purchases to be in unit-dose form.
    ERG concluded that although a bar code requirement would increase 
the relative cost of the unit-dose version of a product, the cost 
increment would not be great enough to significantly impact the market. 
In fact, ERG found that the expected reduction in hospital over-
packaging could increase market demand for unit-dose products despite 
the cost difference. Thus, we expect that the final rule will not have 
a significant impact on product packaging choices.
3. Implementation Period
    We were interested in the effects of shortening or lengthening the 
implementation of the regulation. However, discussions with hospital 
administrators indicated that the adoption rate of bar codes would not 
be noticeably accelerated with shorter implementation period. They felt 
that it was unlikely that investments would be made earlier. Therefore, 
benefits would be unlikely to change whether the implementation period 
was longer or shorter. The regulatory costs of compliance would 
increase with shorter implementation periods. At a 7-percent annual 
discount rate, the average annualized regulatory cost would increase 
from $8.4 million with a 2-year implementation period to $8.5 million 
with a one-year implementation period and decrease to $8.3 million with 
a 3-year period.
    If a 1-year implementation date persuaded one hospital to invest 1 
year earlier, 16.7 ADEs could be avoided. The value of avoiding these 
events is $3.1 million. In comparison, if a hospital invested in a bar 
code reading system a year earlier than it otherwise would have, it 
would have increased costs of about $620,000 based on amortization of 
investment and one additional year of operating costs. The net benefit 
($2.5 million), when amortized over 20 years, would result in average 
annualized benefits of over $0.2 million. This is greater than the 
average annualized cost of the shorter implementation period. However, 
as noted earlier, discussions with hospital administrators and budget 
planners have not indicated that a shorter implementation period would 
have an effect on these investment decisions.
4. Value of Mortality Associated with ADEs
    ERG estimated that 2.8 percent of preventable ADEs and 2 percent of 
all AHTRs are fatal. This was derived by averaging results from several 
medical studies. These studies relied on relatively small samples and 
varying methodologies. Due to the uncertainty attached to this estimate 
and the major impact this assumption has on valuing public health 
benefits, we tested two additional mortality rates: 1 percent and 0.1 
percent. These rates reduce the expected value of an avoided ADE from 
$185,800 to $93,700 and $48,400, respectively, by changing the 
probability distribution of the expected outcomes of ADEs. The impact 
on the expected annualized benefits of ADE avoidance falls from $5.2 
billion to $2.6 billion and $1.4 billion respectively. These estimated 
benefits continue to exceed the costs.
5. Value per QALY
    There is no precise measure of value for a quality-adjusted life-
year. We have used average published estimates of society's implied 
value of a statistical life (VSL) of $5 million derived from wage 
premiums required to attract employment to higher risk occupations. The 
life expectancy of a 35 year-old blue-collar male employee (the basis 
for most of the wage premium data) was adjusted for expected future bed 
and non-bed disability. When the implied VSL is amortized over the 41.3 
years of adjusted life-expectancy using a 7 percent discount rate, the 
resulting value ($373,000) implies societal willingness-to-pay for a 
QALY. Cost-effectiveness studies have claimed that lower values, as low 
as $100,000, may better represent QALYs. In addition, the VSL value is 
based on research conducted in the early 1990's and relies on relative 
risk and relative wages. Other estimates of VSL have ranged

[[Page 9166]]

from as low as $2 million to as high as $10 million.
    We analyzed the societal benefit of the regulation using $100,000 
as the QALY value and the low VSL estimate ($2 million) as the 
representative of societal willingness to pay (WTP) to avoid the 
probability of a fatality. The WTP to avoid an ADE decreased from 
$185,800 to $71,600 using these parameters. Overall, the annualized 
benefit of the proposed regulation fell from $5.2 billion to $2.0 
billion.
6. Boundary Analysis
    We analyzed the minimum number of hospital-years of bar code 
adoption necessary for estimated benefits to exceed costs. The 
regulatory costs of the regulation account for only 0.2 percent of the 
net societal benefits. This implies that the regulation would need to 
encourage early adoption of bar code technology by at least 0.2 percent 
in order for benefits to exceed costs. In baseline, we expect 51,410 
hospital-years of installed bar codes. (The 101 current user of bar 
code systems will use it for all 20 years, the remaining 4,939 
hospitals will have installed systems for an average of 10 years each.) 
The regulation would have to encourage 103 additional hospital-years 
(0.02 percent). This could occur by 103 hospitals investing 1 year 
earlier than they would in baseline.
7. Hospital Response Rates
    The expected benefits rely on a faster rate of hospital acceptance 
of bar code technology than the rate expected in the absence of the 
regulation. The current estimate of public health benefits is based on 
all hospitals acquiring bar coding systems within 10 years as compared 
to 20 years without the rule. However, because we are not requiring 
hospitals to make this investment, we examined the impact of different 
diffusion rates. ERG examined 2 additional scenarios; one in which the 
technology is accepted within 20 years with a rule as compared to 30 
years without a rule as well as one in which technology is accepted 
within 15 years as compared to 20 with the rule. Both cases decrease 
costs and benefits. The first case reduced expected annualized net 
benefits from $4.5 billion to $3.2 billion. Annualized hospital 
expenditures declined from $657 million to $493 million and benefits 
decreased from $5.2 billion to $3.7 billion. The second case reduced 
annualized net benefits to $1.6 billion. Annualized hospital 
expenditures declined from $657 million to $320 million and benefits 
decreased from $5.2 billion to $1.9 billion. The public health benefits 
of the rule would still exceed costs and expenditures with these slower 
diffusion rates.
8. Hospital Intercept Rates with Machine-Readable Technology
    Avoidance of patient ADEs depends on the expected rate of error 
interception. For this analysis, ERG found that about 45 percent of the 
errors that lead to preventable ADEs originate in the dispensing and 
administration stages of the medication process and that the use of bar 
coded information and installed systems would intercept about 50 
percent of these errors. Because of the direct relationship between 
expected interception rates and avoided ADEs, we tested the impact of 
the assumed rates. Although the literature has implied that 
interception rates as high as 85 percent are obtainable, ERG assumed a 
50 percent rate to account for potential non-optimal use of technology. 
If the true increase in interception rates were between 80 percent and 
20 percent, the total number of avoided ADEs would be between 805,700 
and 198,500. The monetized annualized value of these avoided ADEs would 
vary from the current estimate of $5.2 billion to the lower and higher 
values of $2.1 billion (with a 20 percent improvement in interception 
rates) or $8.3 billion (with an 80 percent improvement in interception 
rates). From a societal perspective, therefore, the accelerated 
technology investment appears reasonable even with significantly lower 
interception rates.
9. Productivity Losses in Hospital Wards
    The decision by hospitals to make significant investments in bar 
code reading technology is highly dependent on expected productivity 
changes in the delivery of bedside care by nurses. Our current analysis 
assumes a 3 percent productivity loss of ward nurses due to the use of 
this new technology (see section VII.G). We examined the sensitivity of 
this estimate and found that if long-term productivity loss 
approximated only 1 percent of the current workload, the average 
annualized cost of accelerated hospital investments would decrease from 
$657.2 million to $238.4 million. However, if the productivity loss of 
nursing resources were as great as 5 percent, the annualized 
expenditures by hospitals would increase to $1.2 billion. In order for 
the productivity losses to outweigh the expected benefits, however, 
there would have to be an almost 700 percent estimated productivity 
loss.
10. Investments by Hospital Size
    The internal decision to acquire and use new bar code reading 
technology could be affected by the size of the purchasing hospital. 
Hospitals that have already installed this equipment are, for the most 
part, fairly large or part of a large network of hospitals. Because the 
benefits of error interception are dependent on the number of annual 
admissions, we were concerned about the likelihood of technology 
adoption by small hospitals.
    According to the most recent census, there are 1,218 hospitals in 
the United States with capacities fewer than 50 beds. These hospitals 
account for only about 3 percent of the estimated annualized 
opportunity cost of investment from this rule, because the potential 
productivity losses are not as great as for larger hospitals. The 
annualized opportunity costs per facility with fewer than 50 beds is 
about $69,200. However, because of the fewer admissions to hospitals of 
this size, we estimate that the interception rate of the bar code 
technology is expected to result in an average of 2.2 avoided ADEs per 
year per facility. The estimated societal benefit of avoiding 2.2 ADEs 
is $408,800. If these small hospitals adopt technology at the same 
accelerated rate as all hospitals, the annualized benefit per hospital 
is $116,900, or more than the investment.
    We are aware that the estimated direct annual hospital cost savings 
of avoiding ADEs alone ($2,257 per avoided ADE) may not cover the costs 
of the expected earlier investment pattern. For example, the average 
facility with fewer than 50 beds would experience direct annual cost 
savings of $4,965 (2.2 ADEs avoided x $2,257) and annualized costs of 
$69,200. As noted, the investment decision to install bar code reading 
technology is voluntary and would include consideration of patient 
safety and other cost-savings. We have estimated that potential 
reductions in resources needed to generate reports and keep track of 
records may likely vary between $27,400 and $43,700 per year for a 
small hospital. Other institutional gains, including transfers such as 
increased revenue capture rates and reduced malpractice awards, may 
also affect internal decisions. Many industry representatives have 
indicated their willingness to invest in this technology. Nonetheless, 
even if some hospitals choose to delay or not to invest, this rule 
would still produce substantial societal benefits.

[[Page 9167]]

P. Small Business Analysis and Discussion of Alternatives

    We believe the final rule is unlikely have a significant impact on 
a substantial number of small entities. Despite this, in the proposed 
rule, we prepared an initial Regulatory Flexibility Analysis (IRFA) and 
invited comment from affected entities. In addition, the final rule is 
considered a significant economic impact under UMRA and alternatives 
are examined and briefly discussed here.
1. Affected Sectors and Nature of Impacts
    We described the affected industry sectors earlier in this section. 
The final rule directly affects manufacturers of pharmaceutical and 
biological products (NAICS 325412 and NAICS 325414), packaging services 
(NAICS 561910), and indirectly affect hospitals (NAICS 622). The 
regulation does not affect blood and organ banks (NAICS 621991). We 
accessed data on these industries from the 1997 Economic Censuses and 
estimated revenues per establishment. Although other economic measures, 
such as profitability, may provide preferable alternatives to revenues 
as a basis for estimating the significance of regulatory impacts in 
some cases, any reasonable estimate of profits would not change the 
results of this analysis. These revenues were updated to 2000 values by 
using the Consumer or Producer Price Index as appropriate.
    a. Pharmaceutical manufacturers (NAICS 325412). The Small Business 
Administration (SBA) has defined as small any entity in this industry 
with fewer than 750 employees. According to census data, 84 percent of 
the industry is considered small. The average annual revenue for these 
small entities is $26.6 million per entity. Small manufacturers of 
prescription and OTC drug products dispensed pursuant to an order and 
commonly used in hospitals would be required to generate and label 
products with bar coded information. We estimate the annualized 
compliance costs for small entities in this industry at $1,800 per 
entity. This is less than 0.1 percent of their annual revenues. We 
believe this does not constitute a significant impact on a substantial 
number of small entities in this industry.
    b. Biological product manufacturers (NAICS 325414). The SBA has 
defined as small any entity in this industry with fewer than 500 
employees. According to census data, 68 percent of the industry is 
considered small. The average annual revenue for these small entities 
is $4.7 million per entity. Small manufacturers of biological products 
would be required to label products with bar coded information. We 
estimate the annual compliance costs for small entities in this 
industry at $600 per entity. This is less that 0.1 percent of their 
annual revenues. We believe this does not constitute a significant 
impact on a substantial number of small entities in this industry.
    c. Packagers (NAICS 5619190). The SBA has defined as small any 
entity in this industry that has less than $6 million in annual 
revenues. On this basis, almost 75 percent of the industry is 
considered small. The average annual revenue for small entities is $1.7 
million per entity. Small packagers would be required to apply bar 
coded information to all affected products. This would require printing 
and process improvements to packaging operations. We estimated the 
annualized compliance costs for small entities in this industry at $240 
per entity. This is less than 0.1 percent of their annual revenues. We 
believe this does not constitute a significant impact on a substantial 
number of small entities in this industry.
    d. Blood and organ banks (NAICS 621991). The SBA has defined as 
small any entity in this industry that has less than $8.5 million in 
annual revenues. On this basis, 40 percent of the industry is 
considered small. The average annual revenue for small entities is $1.4 
million per entity. Small blood banks and collection centers currently 
apply bar coded information to all blood products and would not be 
affected by this regulation.
    e. Hospitals (NAICS 622). The SBA has defined as small any entity 
in this industry with less than $29.0 million in annual revenues. 
According to census data, 35 percent of the industry is considered 
small. The average annual revenue for small entities is $12.6 million 
per entity. There is no specific regulatory requirement for hospitals 
to respond to this regulation. We anticipate that the rule would make 
the investment in bar code technology more attractive to hospitals, but 
the final rule does not require hospitals to make such investments. 
Hospitals that have already installed bar code reading systems and 
internally affix self-generated information might find it necessary to 
prematurely upgrade or replace currently installed scanners in order to 
capture bar coded information on small vials or bottles. These 
hospitals would also achieve productivity gains by avoiding the 
resources now used to self-generate bar code readable information. The 
total annual net cost of the regulation is estimated at $3,300 per 
facility, which is equal to less than 0.1 percent of their annual 
revenues. We believe this does not constitute a significant impact on a 
substantial number of small entities in this industry.
2. Alternatives
    We considered several alternatives to the regulation. Each is 
discussed below.
    a. Do nothing. This alternative would not result in any change in 
current labeling or packaging practices. We believe that in the absence 
of agency action, hospitals would gradually purchase and utilize 
independent bar code reading systems, but that it would take 20 years 
before they were installed in all facilities. We rejected this 
alternative because of the expected positive net benefits of the rule. 
Also, we believe that standardizing bar codes would generate additional 
health and production efficiencies for a variety of different health 
care sectors.
    b. Requiring variable information. We considered requiring 
additional information in bar codes, such as expiration dates and lot 
numbers. The incremental benefit of this data would include improved 
inventory control and ease of recalls. In addition, we are aware that 
some firms are voluntarily applying this information. However, we were 
unable to quantify the potential public health benefits of this 
additional information and the estimated additional annualized cost of 
this alternative was $59.1 million. We did not select this alternative 
because we could not demonstrate that the added benefits would exceed 
the added costs.
    c. Covering all OTC drug products. We considered requiring all OTC 
drug products to include bar coded information. This alternative is 
rejected because the additional costs do not appear to be justified by 
the expected benefits. At this time, most non-institutional settings 
are unlikely to have access to bar code reading systems. Therefore, we 
could not identify any significant reductions in ADEs due to this 
alternative. Including all OTC drug products would create estimated 
additional annualized costs to the manufacturing sector of $0.7 
million. The expected annualized regulatory costs of the regulation 
therefore would increase from the current estimate of $8.4 million to 
$9.1 million with no additional quantifiable benefit.
    d. Exemption for small entities. We considered exempting small 
entities, but rejected the alternative due to the modest projected 
impact of this initiative on small businesses and the lack of label 
standardization that would result. We will consider exemptions on

[[Page 9168]]

a product basis, not on the size of the affected entity.
    e. FDA selecting a specific symbology. We considered requiring bar 
coded information with a specific symbology. The rationale for 
considering this option was to minimize uncertainty to hospitals in 
selecting systems that would be able to confidently read the specific 
language. We decided, however, that identifying a specific symbology 
might adversely impact future innovations in other machine-readable 
technologies. The selected alternative would allow individual 
facilities and suppliers to devise systems that would maximize their 
own internal efficiencies, as long as the standardized information 
could be accessed. The lack of consistent universal standards has been 
a major impediment to the use of this technology. As long as 
symbologies could be read within a single standard, however, the 
identified market failure would be overcome. In addition, the expected 
costs of this alternative would be much greater than the selected 
alternative. Annualized costs to manufacturers would increase to $19.0 
million and significant costs would occur to the retail sector due to 
the need for accelerated upgrade or replacement of currently installed 
scanners. Retail pharmacies would incur annualized costs of $27.6 
million. Consequently, we rejected the alternative of identifying a 
specific symbology.
3. Outreach
    We conducted a public meeting on July 26, 2002, to solicit comments 
from the affected sectors. Interested parties from the health care 
sector, manufacturing sector, retail sector, and equipment suppliers 
provided comment and insight to the agency. In addition, we met with 
various industry groups in order to ensure viewpoints were 
appropriately considered. These insights affected the regulatory 
considerations, and additional outreach is planned during the 
regulatory process.
    We also received over 190 comments on the proposed rule.
4. What Comments Did We Receive on Our Economic Analysis?
    Several comments focused on the proposed rule's ``Analysis of 
Impacts'' discussion. The analysis summarized the rule's costs and 
benefits.
    (Comment 76) The preamble to the proposed rule estimated that 4,229 
packaging lines are used in 1,447 establishments (68 FR at 12519). One 
comment disagreed with this estimate. The comment, submitted by a 
medical gas firm, claimed that the rule would affect more than 1,000 
members of the gases and welding distributors association and that 600 
members package or distribute medical gases. The comment said there are 
approximately 10 major manufacturers of medical gas products in the 
United States, and many either own or control approximately 200 
locations that repackage or distribute medical gas.
    (Response) We agree that the proposed rule did not take this 
industry into account. However, because the final rule exempts medical 
gases from the bar code requirement, we do not need to adjust our 
analysis.
    (Comment 77) The preamble to the proposed rule estimated the 
present value of the total costs to manufacturers, repackers, 
relabelers, and private label distributors as $33.2 million and average 
annualized costs of $3.2 million (68 FR 12520 through 12521).
    Several comments claimed this estimate was too low. One comment 
from a medical gas firm said implementing the rule would cost $5 
million for one firm and that annual maintenance and material costs 
cannot be accurately determined. The comment said that the cost to the 
medical gas industry alone would be over $100 million.
    Two comments from allergenic extract firms also claimed high costs. 
One comment said that the firm would need to add 800 new NDC numbers 
and create new labels for its products. The comment claimed that the 
new labels would have to be printed by another company and it projected 
those costs as being $37,000 for required equipment and artwork, 
$39,000 for 640 hours of computer programming time to test and validate 
the new label format, $17,000 for inventory control, purchasing, and 
regulatory personnel time for internal control of each label and 
package change (based on an estimate of more than 530 hours at $31 per 
hour), $18,000 for changes in their standard operating procedure, and 
``unknown, but substantial'' costs for locating a new vendor to prepare 
the new labels. The comment said these costs would be three or four 
times the firm's current $4,000 label costs and estimated its total 
costs as approximately $120,000. Another firm estimated its total cost 
as $166,500, excluding ``unknown, but substantial hidden costs required 
due to the small nature of some of our final containers.''
    Three comments from pharmaceutical companies and a trade 
association also claimed the industry cost estimate was low. The 
comments said that manufacturers would have to purchase new or upgraded 
equipment to print high quality bar codes. One comment said that 
manufacturers would have to upgrade existing packaging equipment or buy 
new equipment, and those purchases would result in substantial 
investments that would exceed FDA's initial cost estimates.
    (Response) We agree that specific firms will experience higher 
compliance costs than the average costs presented in the proposal and 
discussed in Reference 1 in the docket. However, ERG interviewed many 
companies, vendors, and industry consultants to arrive at their 
estimates of the incremental compliance costs for the affected 
industry. We agree that costs to medical gas and allergenic extract 
manufacturers were not explicitly accounted for in the proposal and 
that these industries are exempted from the final rule. We believe the 
methodology described in Reference 1 results in reasonable incremental 
costs of the final rule to industry. Our interviews with industry 
consultants have noted that many pharmaceutical manufacturers either 
currently use bar codes in their labels or are in the process of 
voluntarily applying bar codes. The costs attributable to the final 
rule are only those costs incurred in addition to voluntary costs. We 
disagree that the cost estimates to manufacturers, repackers, 
relabelers, and private label distributors do not reflect typical costs 
to typical firms.
    (Comment 78) The preamble to the proposed rule estimated the 
regulatory costs to hospitals as being $6.1 million, with an average 
annualized cost of $0.6 million (68 FR 12521). One comment disagreed 
with this estimate, claiming that the rule would be very expensive for 
small State mental hospitals because manufacturers will pass on their 
costs to customers, and because wireless equipment (for reading the bar 
codes) will be even more expensive. The comment added that increases in 
package size will mean that automated drug dispensing machines will 
have to be stocked more frequently or small hospitals will have to 
carry more floor stock that is not controlled by such machines, which 
will reduce patient safety.
    (Response) We disagree that the final rule will be very expensive 
for small hospitals. The final rule does not require small hospitals to 
invest in bar code technology, and we recognize that any such decision 
will be affected by individual circumstances. ERG did not find 
definitive evidence that regulatory costs are automatically passed on 
to customers, and we have analyzed these costs at the manufacturer 
level. In addition, we found no indication that

[[Page 9169]]

package sizes would definitely change as a result of this regulation. 
RSS symbology could be used so that no changes would occur in package 
size. We examined the impact of bar code technology on small hospitals 
as a sensitivity analysis.
    (Comment 79) The preamble to the proposed rule mentioned that the 
American Hospital Association had stated that bar codes would help 
streamline payment, billing, and administrative systems and lead to 
efficient management of assets and resources (68 FR 12520).
    One comment said that most inpatient reimbursement involves a high 
proportion of Medicare and Medicaid patients under a prospective 
payment or per diem basis, so increased accuracy of charge does not 
necessarily result in increased revenue. The comment said that costs 
associated with implementing bar code scanning would not be offset by 
increased reimbursement.
    (Response) The comment may have misinterpreted the preamble to the 
proposed rule. We did not claim that bar codes would increase hospital 
revenue due to increased accuracy in billing. While we did present 
results that indicated the possibility of increased cost capture rates 
in the preamble, those distributive effects did not indicate 
reimbursement. Instead, the preamble to the proposed rule focused on 
cost savings in avoiding adverse drug events (68 FR at 12527), and we 
recognized that the estimated direct annual hospital cost saving of 
avoiding unnecessary treatment might not cover the costs of earlier 
investments. We stated that a hospital's decision to acquire and use 
bar code technology could be affected by the hospital's size. We only 
noted that increased reimbursement might be an additional benefit of 
the technology.
    (Comment 80) The preamble to the proposed rule stated that the rule 
would result in premature replacement of scanners currently used in 
hospital pharmacies and treatment wards (68 FR at 12521). We estimated 
that the present value of the incremental costs of accelerated scanner 
replacement or upgrade to be approximately $13.7 million, with an 
average annualized cost to hospitals of early replacement of $1.3 
million.
    One comment claimed that the ``half-life'' of scanners is less that 
the proposed rule's 3-year implementation window. The comment claimed 
``at least half of all scanners currently in use will have been retired 
or replaced'' by the time we would require all drugs to have a bar 
code. The comment said the remaining scanners would have some useful 
life remaining and could be used for other purposes.
    (Response) We agree with this comment. The estimate of expected 
costs of replacing scanners in hospitals uses the expected useful life 
of scanners and the costs of upgrading current scanners. ERG estimated 
that scanners are replaced within 5 years. After the implementation 
period, scanners that do not have the capability to read RSS symbology 
that have not been replaced must be either replaced or upgraded. This 
was explained in Reference 1.
    (Comment 81) One comment from a pharmaceutical manufacturer said 
that the health care system would not benefit if hospitals are forced 
to pay more for bar-coded products before they have systems in place to 
use those bar codes. The comment argued that hospitals should be able 
to keep buying OTC drugs at the lowest cost (usually the largest 
package size and without a bar code). The comment said this would let 
hospitals keep their costs down while they invest in bar code 
technology.
    (Response) The comment misinterpreted the proposed rule. Neither 
the proposed rule nor the final rule requires hospitals to purchase 
only bar-coded OTC drugs. Hospitals will continue to be free to make 
purchasing decisions based on criteria that are best for individual 
facilities.
    (Comment 82) One comment said that there was little analysis of the 
implementation costs on those who would use the bar codes other than to 
estimate that the speed of adoption will double. The comment said we 
should evaluate the implementation costs.
    (Response) We disagree with this comment. ERG and FDA have 
conducted detailed analyses to estimate implementation costs to users. 
These analyses are available in Reference 1, in the docket for the 
proposed rule, and summarized in the Analysis of Impacts.
    (Comment 83) The preamble to the proposed rule considered various 
regulatory alternatives, including selection of a specific symbology 
(68 FR 12529).
    One comment supported requiring the use of DataMatrix, claiming 
that DataMatrix has a minimal cost difference to implement when 
compared with linear bar coding symbologies, and that such costs will 
continue to decline. The comment claimed that 70 percent of packaging 
lines are already DataMatrix capable, and this would allow 
implementation at the lowest cost and in the shortest time.
    (Response) Although the comment discussed DataMatrix in the context 
of our economic analysis, the comment's focus is the use of DataMatrix 
rather than a linear bar code. We discuss issues regarding linear bar 
codes and other technologies, including DataMatrix, at comment 38, and 
we refer to our response there to explain why the final rule continues 
to require a linear bar code.

Q. Conclusion

    We have examined the regulation and find that the expected benefits 
outweigh the costs and that the regulation would improve public health. 
Reference 1 provides a detailed analysis that includes references and 
support for the assumptions and estimates of this section.

R. References

    The following references have been placed on display in the 
Division of Dockets Management (see ADDRESSES) and may be seen by 
interested persons between 9 a.m. and 4 p.m., Monday through Friday. 
(FDA has verified the Web site address, but FDA is not responsible for 
any subsequent changes to the Web sites after this document publishes 
in the Federal Register.)
    1. Eastern Research Group, ``Impact of Final Bar Code 
Regulations for Drug and Biological Products,'' Contract Number 223-
03-8500, Task Order Number 2, December 11, 2003.
    2. Bates, D. W. et al., ``Incidence of Adverse Drug Events and 
Potential Adverse Drug Events,'' Journal of the American Medical 
Association, 274:29-34, July 5, 1995.
    3. Classen, D. C. et al., ``Adverse Drug Events in Hospitalized 
Patients,'' Journal of the American Medical Association, 277:301-
306, January 22 and 29, 1997.
    4. Jha, A. K. et al., ``Identifying Adverse Drug Events,'' 
Journal of the American Medical Informatics Association, 5(3):305-
314, May/June 1998.
    5. Senst, B. L. et al., ``Practical Approach to Determining 
Costs and Frequency of Adverse Drug Events in a Health Care 
Network,'' American Journal of Health-System Phamacy, 58:1126-1132, 
June 15, 2001.
    6. Leape, L. L. et al., ``Systems Analysis of Adverse Drug 
Events,'' Journal of the American Medical Association, 274:35-43, 
July 5, 1995.
    7. Sazama, K., ``Reports of 355 Transfusion-Associated Deaths: 
1976 Through 1985,'' Transfusion, 30:583-590, July 1990.
    8. Callum, J. L. et al., ``Reporting of Near-Miss Events for 
Transfusion Medicine: Improving Transfusion Safety,'' Transfusion, 
41:1204-1211, October 2001.
    9. Eastern Research Group, ``Profile of Machine-Readable 
Technologies for Medical Applications,'' Contract Number 223-94-
8031, in partial fulfillment of Task Order Number 8, November 29, 
2001.
    10. Coyle, G. A., ``Bar Code Medication Administration: 5 Deal 
Breakers, Pearls, and Perils'' Proceedings, Bar Code Medication 
Administration Conference (P. J. Schneider, ed.), [email protected] Center for 
Medication Safety

[[Page 9170]]

and Clinical Improvement, San Diego CA, April 21-22, 2003.
    11. Schneider, P. J., ``Framing the Opportunity for Bar Code 
Medication Administration,'' Proceedings, Bar Code Medication 
Administration Conference (P. J. Schneider, ed.), [email protected] Center for 
Medication Safety and Clinical Improvement, San Diego CA, April 4-5, 
2003.
    12. Yang, M. et al., ``The Effect of Barcode Enabled Point of 
Care Technology on Medication Administration Errors,'' Bridge 
Medical, Inc., April 2001.
    13. Brown, M. M., personal communication between M. M. Brown, 
Senior Clinical Consultant Bridge Medical, Inc., and C. Franz of 
Eastern Research Group, April 16 and 19, 2002.
    14. Rough, S., personal communication between S. Rough, Pharmacy 
Service Organization, University of Wisconsin Hospital and Clinics, 
and C. Franz of Eastern Research Group, April 22 and 23, 2002.
    15. Churchill, W. W., site visit with W. W. Churchill, Director 
of Pharmacy Services, Brigham and Women's Hospital, Boston MA by J. 
Eyraud and C. Franz both of the Eastern Research Group, April 7, 
2002.
    16. Linden, J. V. et al., ``A Report of 104 Transfusion Errors 
in New York State,'' Transfusion, 32:601-606, July 1992.
    17. Gurwitz, J. H. et al., ``Incidence and Preventability of 
Adverse Drug Events in Nursing Homes,'' The American Journal of 
Medicine, 109:87-94, August 1, 2000.
    18. Barker, K. N. et al., ``Medication Errors Observed in 36 
Health Care Facilities,'' Archives of Internal Medicine, 162:1897-
1903, September 9, 2002.
    19. Jury Verdict Research, ``Medical Malpractice Verdict and 
Settlement Study Released,'' www.juryverdictresearch.com, accessed 
February 27, 2003.
    20. U. S. General Accounting Office, ``Impact on Hospital and 
Physician Costs Extends Beyond Insurance,'' GAO/AIMD-95-169, 
September 1995.
    21. American Hospital Association, ``Medical Liability Crisis 
Affects Communities Access to Care,'' www.hospitalconnect.com/aha, 
accessed April 28, 2003.
    22. U. S. Department of Health and Human Services, ``Update on 
the Medical Litigation Crisis: Not the Result of the `Insurance 
Cycle,' '' Office of the Assistant Secretary for Planning and 
Evaluation, September 25, 2002.
    23. Mello, M., personal communication between M. Mello, 
Assistant Professor of Health Policy and Law, Harvard University and 
R. Motwane of the Eastern Research Group, September 19, 2003.
    24. Wu, A. W., ``Handling Hospital Errors: Is Disclosure the 
Best Defense?'' Annals of Internal Medicine, 131:970-972, December 
21, 1999.
    25. Rothchild, J. M. et al., ``Analysis of Medication-Related 
Malpractice Claims,'' Archives of Internal Medicine, 162:2414-2420, 
November 25, 2002.
    26. Lee, L. W. et al., ``Use of Automated Medication Storage and 
Distribution System,'' American Journal of Hospital Pharmacistis, 
49:851-855, April 1992.
    27. Linden, J.V. et al., ``Transfusion Errors in New York State: 
An Analysis of 10 Years' Experience,'' Transfusion, 40:1207-1213, 
October 2000.
    28. Malcolm B. et al., ``Veteran's Affairs: Eliminating 
Medication Errors Through Point-of-Care Devices,'' Technical Paper 
for 2000 Annual HIMSS Conference, November 30, 1999.
    29. Bates, D. W. et al., ``The Cost of Adverse Drug Events in 
Hospitalized Patients,'' Journal of the American Medical 
Association, 277:307-311, January 22 and 29, 1997.
    30. Ernst, F. R. and A. J. Grizzle, ``Drug Related Morbidity and 
Mortality: Updating the Cost-of-Illness Model,'' Journal of the 
American Pharmaceutical Association, 41:192-199, March/April 2001.
    31. Bates, D. W. et al., ``The Cost of Adverse Drug Events in 
Hospitalized Patients,'' Journal of the American Medical 
Association, 277:301-311, January 22 and 29, 1997.

List of Subjects

21 CFR Part 201

    Drugs, Labeling, Reporting and recordkeeping requirements.

21 CFR Part 606

    Blood, Labeling, Laboratories, Reporting and recordkeeping 
requirements.

21 CFR Part 610

    Biologics, Labeling, Reporting and recordkeeping requirements.

0
Therefore, under the Federal Food, Drug, and Cosmetic Act and under 
authority delegated to the Commissioner of Food and Drugs, 21 CFR parts 
201, 606, and 610 are amended as follows:

PART 201--LABELING

0
1. The authority citation for 21 CFR part 201 continues to read as 
follows:

    Authority: 21 U.S.C. 321, 331, 351, 352, 353, 355, 358, 360, 
360b, 360gg-360ss, 371, 374, 379e; 42 U.S.C. 216, 241, 262, 264.

0
2. Section 201.25 is added to read as follows:


Sec.  201.25  Bar code label requirements.

    (a) Who is subject to these bar code requirements? Manufacturers, 
repackers, relabelers, and private label distributors of a human 
prescription drug product or an over-the-counter (OTC) drug product 
that is regulated under the Federal Food, Drug, and Cosmetic Act or the 
Public Health Service Act are subject to these bar code requirements 
unless they are exempt from the registration and drug listing 
requirements in section 510 of the Federal Food, Drug, and Cosmetic 
Act.
    (b) What drugs are subject to these bar code requirements? The 
following drug products are subject to the bar code label requirements:
    (1) Prescription drug products, however:
    (i) The bar code requirement does not apply to the following 
entities:
    (A) Prescription drug samples;
    (B) Allergenic extracts;
    (C) Intrauterine contraceptive devices regulated as drugs;
    (D) Medical gases;
    (E) Radiopharmaceuticals; and
    (F) Low-density polyethylene form fill and seal containers that are 
not packaged with an overwrap.
    (ii) The bar code requirement does not apply to prescription drugs 
sold by a manufacturer, repacker, relabeler, or private label 
distributor directly to patients, but versions of the same drug product 
that are sold to or used in hospitals are subject to the bar code 
requirements.
    (2) Biological products; and
    (3) OTC drug products that are dispensed pursuant to an order and 
are commonly used in hospitals. For purposes of this section, an OTC 
drug product is ``commonly used in hospitals'' if it is packaged for 
hospital use, labeled for hospital use (or uses similar terms), or 
marketed, promoted, or sold to hospitals.
    (c) What does the bar code look like? Where does the bar code go?
    (1) Each drug product described in paragraph (b) of this section 
must have a bar code that contains, at a minimum, the appropriate 
National Drug Code (NDC) number in a linear bar code that meets 
European Article Number/Uniform Code Council (EAN.UCC) or Health 
Industry Business Communications Council (HIBCC) standards. 
Additionally, the bar code must:
    (i) Be surrounded by sufficient blank space so that the bar code 
can be scanned correctly; and
    (ii) Remain intact under normal conditions of use.
    (2) The bar code must appear on the drug's label as defined by 
section 201(k) of the Federal Food, Drug, and Cosmetic Act.
    (d) Can a drug be exempted from the bar code requirement?
    (1) On our own initiative, or in response to a written request from 
a manufacturer, repacker, relabeler or private label distributor, we 
may exempt a drug product from the bar code label requirements set 
forth in this section. The exemption request must document why:
    (i) compliance with the bar code requirement would adversely affect 
the safety, effectiveness, purity or potency of the drug or not be 
technologically feasible, and the concerns underlying the request could 
not reasonably be addressed by measures such as package redesign or use 
of overwraps; or

[[Page 9171]]

    (ii) an alternative regulatory program or method of product use 
renders the bar code unnecessary for patient safety.
    (2) Requests for an exemption should be sent to the Office of New 
Drugs (HFD-020), Center for Drug Evaluation and Research, Food and Drug 
Administration, 5600 Fishers Lane, Rockville, MD 20857 (requests 
involving a drug product) or to the Office of Compliance and Biologics 
Quality (HFM-600), Center for Biologics Evaluation and Research, Food 
and Drug Administration, 1401 Rockville Pike, Rockville, MD 20852 
(requests involving a biological product).

PART 606--CURRENT GOOD MANUFACTURING PRACTICE FOR BLOOD AND BLOOD 
COMPONENTS

0
3. The authority citation for part 606 continues to read as follows:

    Authority: 21 U.S.C. 321, 331, 351, 352, 355, 360, 360j, 371, 
374; 42 U.S.C. 216, 262, 263a, 264.

0
4. Section 606.121 is amended by revising paragraph (c)(13) to read as 
follows:


Sec.  606.121  Container label.

* * * * *
    (c) * * *
    (13) The container label must bear encoded information in a format 
that is machine-readable and approved for use by the Director, Center 
for Biologics Evaluation and Research.
    (i) Who is subject to this machine-readable requirement? All blood 
establishments that manufacture, process, repack, or relabel blood or 
blood components intended for transfusion and regulated under the 
Federal Food, Drug, and Cosmetic Act or the Public Health Service Act.
    (ii) What blood products are subject to this machine-readable 
requirement? All blood and blood components intended for transfusion 
are subject to the machine-readable information label requirement in 
this section.
    (iii) What information must be machine-readable? Each label must 
have machine-readable information that contains, at a minimum:
    (A) A unique facility identifier;
    (B) Lot number relating to the donor;
    (C) Product code; and
    (D) ABO and Rh of the donor.
    (iv) How must the machine-readable information appear? The machine-
readable information must:
    (A) Be unique to the blood or blood component;
    (B) Be surrounded by sufficient blank space so that the machine-
readable information can be scanned correctly; and
    (C) Remain intact under normal conditions of use.
    (v) Where does the machine-readable information go? The machine-
readable information must appear on the label of any blood or blood 
component which is or can be transfused to a patient or from which the 
blood or blood component can be taken and transfused to a patient.
* * * * *

PART 610--GENERAL BIOLOGICAL PRODUCTS STANDARDS

0
5. The authority citation for part 610 continues to read as follows:

    Authority: 21 U.S.C. 321, 331, 351, 352, 353, 355, 360, 360c, 
360d, 360h, 360i, 371, 372, 374, 381; 42 U.S.C. 216, 262, 263, 263a, 
264.

0
6. Section 610.67 is added to read as follows:


Sec.  610.67  Bar code label requirements.

    Biological products must comply with the bar code requirements at 
Sec.  201.25 of this chapter. However, the bar code requirements do not 
apply to devices regulated by the Center for Biologics Evaluation and 
Research or to blood and blood components intended for transfusion. For 
blood and blood components intended for transfusion, the requirements 
at Sec.  606.121(c)(13) of this chapter apply instead.

    Dated: January 6, 2004.
Mark B. McClellan,
Commissioner of Food and Drugs.

    Dated: February 4, 2004.
Tommy G. Thompson,
Secretary of Health and Human Services.
[FR Doc. 04-4249 Filed 2-25-04; 8:45 am]
BILLING CODE 4160-01-S