United States: FDA Clarifies Trading Partners Under The DSCSA

The Federal Food and Drug Administration ("FDA") recently published a draft guidance to assist industry and State and local governments in understanding how to categorize entities in the drug supply chain in accordance with the Drug Supply Chain Security Act ("DSCSA"). The DSCSA establishes product tracing, licensure, reporting, and other requirements for certain trading partners in the drug supply chain, including manufacturers, repackagers, wholesale distributors, dispensers, and third-party logistics providers or 3PLs.

Since November 2013, when the DSCSA became law, many clients have been concerned about whether and the extent to which the DSCSA applies to certain segments of the pharmaceutical supply chain industry. Other clients have been concerned about how to satisfy applicable DSCSA requirements for being considered an "authorized" trading partner, and whether some partners – such as solutions providers and logistics and administrative services contractors – should be considered a DSCSA trading partner at all.

The FDA's draft guidance helps to address many of these concerns. Among other things, it clarifies the applicability of DSCSA requirements to entities that take part in the distribution of prescription drugs in the United States. It also explains when and whether such entities are engaged in activities that require licensure and annual reporting, as well as other requirements related to being an "authorized" trading partner in the drug supply chain, as defined by the DSCSA.

Manufacturers. DSCSA treats three distinct entities – 1) the applicant (NDA/BLA) holder, 2) any co-licensed partners, and 3) any affiliates – as a single "Manufacturer" "with respect to a [single] product" for purposes of DSCSA drug pedigree compliance and supply chain security tracking.

Responding to concern about whether the first two entities should register with FDA to be considered a DSCSA authorized trading partner, the draft guidance acknowledges that these entities may meet the DSCSA definition of "manufacturer" even though they do not engage in activities traditionally considered those of a manufacturer (e.g., preparation, propagation, compounding, or processing). The draft guidance then clarifies that these entities "would not be required to register" with FDA, so long as the entities met their obligations under the FD&C Act and the DSCSA.

As for manufacturer affiliates, the draft guidance states that mere business relationships are not sufficient to meet the definition of an "affiliate"; rather, the affiliate-manufacturer relationship must be more robust. Notably, the draft guidance cites to FDA's 2001 final rule for foreign manufacturing registration standards, and thereby signals FDA's intent to interpret the term "affiliate" in a DSCSA context in the same way it does to assess user fees. We had suspected this was the case but it is helpful to have FDA confirm it in the draft guidance. In the user-fee context, FDA relies on and defers to the affiliation standards of the Small Business Administration ("SBA"). According to the SBA, affiliation generally exists when one business controls or has the power to control another, or when a third party (or parties) controls or has the power to control both businesses. Control may arise through ownership, management, or other relationships or interactions between the parties. Aside from standard relationships such as stock ownership and common management, an affiliation relationship can also exist when two companies have identical (or substantially identical) business or economic interests. Even patterns of subcontracting, comingling of staff and/or facilities may evidence an identity of interest. Additionally, an affiliation relationship may be viewed to exist when there are contractual relationships or economic dependencies between two parties.

Repackagers. The DSCSA defines a "Repackager" as a person who owns or operates an establishment that repacks and relabels a product or package for further sale or distribution without further transaction. FDA's draft guidance clarifies that dispensers, specifically pharmacy dispensers, which repackage product into unit-dose packages for administration to an individual patient, are not considered repackagers.

Wholesale distributors. The DSCSA defines a "Wholesale Distributor" as a person (other than a manufacturer, a manufacturer's co-licensed partner, 3PL, or repackager) distributing a product to a person other than a consumer or patient. FDA emphasizes in the draft guidance that many entities formerly within the definitions of wholesale distribution and distributor under the Prescription Drug Marketing Act of 1987 "are now considered 3PLs"; several of which are discussed herein. The draft guidance notes that the definition of "wholesale distribution" excludes the distribution of a manufacturer's own drug, and clarifies that manufacturers who distribute their own drugs are not required to meet licensure requirements for wholesale distributors. FDA also addresses "jobbers" (i.e., persons or entities that own or operate establishments engaging in small scale wholesale distribution, or sell product solely to retailers and institutions), and concludes that jobbers do, in fact, engage in wholesale distribution and are subject to the wholesale distributor requirements under DSCSA.

3PLs. The DSCSA defines a "third-party logistics provider" as an entity that provides or coordinates warehousing, or other logistics services of a product in interstate commerce on behalf of a manufacturer, wholesale distributor, or dispenser of a product, but does not take ownership of the product, nor have responsibility to direct the sale or disposition of the product. The draft guidance recognizes that the DSCSA defines 3PLs broadly, and explains whether six supply chain entities are considered "trading partners" under the DSCSA:

  1. Entities that warehouse but do not own or direct the sale or disposition of product;
  2. Brokers;
  3. Solutions providers;
  4. Common carriers;
  5. Logistics or administrative services contractors; and
  6. Returns processors and reverse logistics providers.

For each type of entity, the draft guidance provides definitions and factors when considering whether the entity is a 3PL. Specifically, FDA clarifies that an entity that warehouses, but does not own or direct the sale or disposition of product is considered a 3PL, even if the facility where warehousing occurs is under common ownership or control with another trading partner. Conversely, according to the draft guidance, brokers are not generally considered 3PLs because they do not provide or coordinate warehousing, nor do they accept or transfer direct possession of product. Similarly, solutions providers are not typically considered 3PLs as they only provide hardware, software, and systems solutions to help achieve compliance with the DSCSA. FDA does not consider entities that only provide transportation services, such as common carriers, to be 3PLs because they do not take ownership or direct the sale of product. (But common carriers that warehouse product that lacks identified consignees or delivery destinations will be considered 3PLs under the DSCSA.) Logistics and administrative services contractors, which FDA considers to be entities that solely contract with other trading partners to provide labor, logistics, or administrative services in a trading partner's facility, are not considered 3PLs. Lastly, the draft guidance confirms that returns processors and reverse logistics providers are considered 3PLs.

The draft guidance announces that FDA intends to regulate (as 3PLs) only entities that provide services that involve the acceptance or transfer of products "from that entity's facility within the United States and its territories on behalf of a trading partner (i.e., manufacturer, repackager, WDD, or dispenser)." It also announces that "3PLs without a facility are not required to be licensed."

Dispensers. FDA's draft guidance provides brief guidance addressing dispensers. It states that although there are circumstances where a dispenser is not required to provide product tracing information, it is recommended that dispensers document sales and transfers in order to support an investigation of suspect or illegitimate product or recall.

Notably, the draft guidance includes a useful table summarizing activities undertaken by each category of trading partner and provides examples of entities that are not typically considered trading partners. We have recreated the chart below as reference.

Comments to the draft guidance are due to FDA on or before October 20, 2017, and can be submitted here.

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

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions