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Volume XII, Number 181

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FDA Publishes Proposed Rule on National Standards for The Licensure of Wholesale Drug Distributors and Third-Party Logistics Providers as Required by The Drug Supply Chain Security Act

The US Food and Drug Administration (FDA) published its proposed rule National Standards for the Licensure of Wholesale Drug Distributors and Third-Party Logistics Providers on February 4, 2022. The proposed rule sets national standards for the licensing of prescription drug wholesale distributors (WDDs) and third-party logistics providers (3PLs) with the goal of strengthening the security of the US drug supply chain. When finalized and effective, these licensing regulations will preempt state and local licensing standards, requirements, and regulations that are different from these federal requirements.

The deadline to submit comments to FDA on the proposed rule is June 6, 2022 (Docket No. FDA-2020-N-1663).

IN-DEPTH

The Drug Supply Chain Security Act (DSCSA), enacted by Congress on November 27, 2013, as part of the Drug Quality and Security Act (DQSA), established a federal system to identify and trace certain prescription drug products through the pharmaceutical distribution supply chain in the United States. Currently, the requirements for WDDs and 3PLs vary considerably across state and local lines. In passing the DSCSA, Congress believed a uniform national standard would ameliorate this issue. Therefore, among the various requirements set forth in the DSCSA, Congress directed the FDA to establish national standards for the licensure of WDDs and 3PLs. The proposed rule withdraws and replaces the current 21 C.F.R. Part 205 in its entirety with a new Part 205 that will implement the licensure requirements of the DSCSA and govern the national licensure of WDDs and 3PLs. In addition, the DSCSA establishes the FDA as the licensing authority for WDDs and 3PLs in states that have not established a licensing program in compliance with the proposed rule. When the proposed rule is final and effective, every U.S. WDD and 3PL will be held to these standards.

The DSCSA includes a provision that preempts states and localities from establishing or continuing requirements for WDD or 3PL licensure that are different from the national standards and requirements. The FDA has interpreted this to mean that the national licensure standards will establish both a “floor” and a “ceiling.” However, the proposed rule declares that state and local licensure requirements that differ from the national standards and requirements applicable under the Federal Food, Drug, and Cosmetic Act will not be preempted until the proposed rule is finalized and effective. This is because the “standards and requirements” that will preempt state and local law in this respect will be established by the proposed rule. The proposed rule will preempt state and local licensure requirements for WDDs two years after it becomes final and one year after it becomes final for 3PLs. However, the FDA declared that it does not intend to enforce the licensing requirements for 3PLs until two years after the proposed rule becomes final. Accordingly, state and local licensing of WDDs and 3PLs may continue in the interim period. In addition, areas within the historical police powers of the states will be unaffected by the proposed rule, including prohibiting employees of WDDs and 3PLs from engaging in criminal conduct related to prescription drugs, provided that these state requirements are not related to licensure of WDDs or 3PLs.

The key provisions of the proposed rule include the following:

  • Definitions of additional terms to help clarify the requirements of the proposed rule and align with current industry practice and existing law, including “3PL activities”, “key personnel”, “minimal quantities”, “other logistics services”, “other than a consumer or patient”, “product”, and “wholesale distribution”;

  • National licensure and application requirements for WDDs and 3PLs, as well as the federal licensure review process;

  • Standards and procedures that set forth licensure denial, suspension, reinstatement, revocation, and voluntary termination, including notice and the opportunity to request a formal evidentiary public hearing under existing FDA hearing procedures;

  • Requirements for pre-license and post-license inspections;

  • Personnel requirements and qualifications necessary for licensure;

  • Surety bond requirements for WDDs;

  • Requirements to establish good storage practices, including personnel requirements and qualifications necessary for good storage practices compliance;

  • Requirements and standards for written policies and procedures to address a product’s sale, purchase, receipt, examination, security, storage, handling, inventory, shipment, transportation, disposition, and distribution;

  • Requirements, standards, and procedures for recordkeeping, document maintenance, and initial and annual reporting; and

  • Requirements, standards, and procedures for the FDA’s approval of third-party accreditation or inspection services or programs (“approved organizations” or “AOs”) to review the qualifications of 3PLs for licensure and conduct inspections of 3PL and WDD facilities, including the standards and procedures for organizations whose requests for approval are denied and for AOs whose approvals are suspended or revoked.

Next Steps

FDA intends to post a webinar to provide an overview of the proposed rule to help stakeholders understand the proposed rule and prepare comments. Because the proposed rule, when final and effective, could have a significant impact on WDDs’ and 3PLs’ business operations, firms should consider submitting comments regarding how the regulations may affect their operations. As noted, the deadline to submit comments to FDA on the proposed rule is June 6, 2022 (Docket No. FDA-2020-N-1663).

© 2022 McDermott Will & EmeryNational Law Review, Volume XII, Number 70
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About this Author

Brian J. Malkin Biotech Lawyer McDermott Will & Emery Law Firm
Partner

Brian Malkin counsels pharmaceutical and biologic clients on Food and Drug Administration (FDA) regulatory matters and intellectual property (IP) law, with an emphasis on patent litigation. His practice at the intersection of FDA- regulated products and patent law makes him a valuable partner to drug manufacturers, biotechnology clients, medical device companies and cannabis companies as they develop new products and protect their innovations though life cycle management, bring their products to market and pursue transactional opportunities.

...

202-756-8045
Harrison R. Farmer Associate McDermott Will & Emery
Associate

Harrison R. Farmer advises life sciences and healthcare clients on a wide range of matters that impact these industries. He counsels medical device, pharmaceutical, technology and biotech companies on US Food and Drug Administration (FDA) regulatory and compliance matters involving the full range of FDA-regulated products. He also counsels on healthcare transactional, regulatory and enforcement matters, particularly focusing on issues involving the Centers for Medicare & Medicaid Services (CMS), the Department of Justice (DOJ) and the US Department of Health and Human Services (HHS)...

202-756-8545
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