United States: HHS Agenda Signals FDA's Intent To Issue Proposed DSCSA Rules In December 2016

FDA intends to issue long-awaited proposed regulations governing the licensing of prescription drug wholesale distributors and third-party logistics providers ("3PLs") this December, according to the updated 2016 HHS regulatory agenda. Under the Drug Supply Chain Security Act ("DSCSA"), FDA was required to issue these regulations no later than two years following the law's November 2013 enactment; however, that deadline passed on November 27, 2015.

Anticipating the critical guidance the regulations will offer to wholesale distributors and 3PLs, we hope FDA meets its new self-imposed December deadline. The DSCSA requires FDA to issue regulations that (1) update the federal standards governing state licensure of wholesale distributors; (2) establish federal standards governing state licensure of 3PLs; and (3) create a federal system for licensing wholesale distributors and 3PLs. The ongoing lack of updated federal standards for state licensing of wholesale distributors (and the lack of any federal standards for state licensing of 3PLs) since the 2013 enactment of the DSCSA has left the drug supply chain grappling with many issues regarding DSCSA requirements with which they must comply. FDA's proposed regulations – and, in particular, the preamble to such regulations – could clarify these issues.

1. Will FDA comment on the extent to which federal licensing standards preempt state licensing requirements?

The DSCSA restricts states from establishing or continuing state licensing standards or requirements that are "inconsistent with, less stringent than, directly related to, or covered by" the requirements set forth in these new federal licensing standards. Draft Guidance released by FDA in October 2014 suggests that the phrase "inconsistent with" only sets a minimum floor with which state licensing must be equal to or greater. However, some posit that the DSCSA phrase "inconsistent with, less stringent than, directly related to, or covered by" also sets a maximum ceiling of requirements which states may not surpass. They also argue that both a minimum and maximum threshold better align with the intentions of the law.

This issue is particularly relevant as states consider to what extent the federal standards preempt their own state licensing standards or the standards of independent third-party accreditation services. For instance, some states currently require independent accreditation by the National Association of Boards of Pharmacy's (NABP) accreditation program, Verified Accredited Wholesale Distributors (VAWD). VAWD's licensing requirements are considered even more stringent than those of some states. Where inconsistencies in the stringency of state or independent licensing requirements and the federal standards exist, will FDA's new federal standards prevent states from mandating VAWD accreditation for some distributors?

2. How comprehensive and definitive will FDA's guidance be to states on how to implement the new federal licensing standards?

States currently follow the limited federal standards for state licensing of wholesale distributors set forth in Section 205 of the 1987 Prescription Drug Marketing Act (PDMA), and as implemented by FDA in Part 205 of the Code of Federal Regulations. When FDA implemented the PDMA, the agency set a minimum floor of standards with which state licensing must be equal to or greater.

Giving states such broad discretion resulted in a patchwork of differing standards for wholesale distributors. Moving forward, the DSCSA aims to achieve uniformity of wholesale distributor and 3PL licensing. Thus, will FDA acknowledge or account for the risk of patchwork requirements caused by state-by-state implementation of federal licensing standards when issuing new federal standards? For example, FDA could offer comprehensive, reproducible standards to be adopted and implemented by each state with little room for interpretation. FDA could also provide examples of what could fall outside the scope of these new standards (e.g., controlled substances, drug monitoring and reporting programs).

3. Will FDA comment on 3PL licensing in states that do not have their own licensing requirements, and where providers cannot yet benefit from federal licensing?

Under the DSCSA, all 3PLs are required to be licensed as 3PLs (and not wholesale distributors), either by FDA or by states that have implemented their own separate state licensing standards for 3PLs. The federal system for 3PL licensing must be used when a state from which the drug is distributed has not established its own standards. However, the federal system has not yet been created. As a result, the DSCSA's licensure requirement has left 3PLs located in states that do not have their own separate state licensing standards for 3PLs in a bind. They are not yet able to benefit from a federal licensing scheme, and they are in some cases struggling to obtain licensing in the state into which the drugs they warehouse or coordinate are distributed.

4. To what extent will FDA recognize inspection of wholesale distributors by independent accreditors such as VAWD?

FDA's proposed rule will include standards for timely physical inspection of any wholesale distribution facility. Section 583(c) allows the federal or state licensing authority to conduct the required inspections or to accept inspection by an approved third-party accreditation or inspection service. Some states rely on inspections conducted by NABP through its VAWD program, even though NABP's VAWD standards are more stringent than both state and federal law. Will FDA recognize the VAWD program as a potential third-party inspection service? The issue of preemption again is highly pertinent. If FDA recognizes the VAWD program, will it want NABP to establish separate inspection standards that track the DSCSA (and FDA's implementing regulations) and not the more stringent VAWD requirements?

5. Finally, how specifically will FDA address independent accreditation of 3PLs?

Section 584(d)(2)(A) requires FDA to establish a process for the issuance of 3PL licenses by federally-approved third-party accreditation programs (unless no such program meets federal requirements under Section 584(d)(2)(B)). How will FDA structure and manage these third-party programs? What rights will 3PLs have to appeal inspection findings? How will FDA approach enforcement actions against non-compliant 3PLs?

We hope these and many other issues are addressed when FDA issues its proposed regulations in December, though an exact date has not yet been set.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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