AvAilAble Online Free tO MeMbers | www.Fdli.Org | july/August 2015

A PublicAtion of the food And drug lAw institute

In ThIs Issue What’s in a Name? Quantifying the Economic Value of Label Information by Anthony J. Anscombe

Skinny Labeling after Hospira v. Burwell: An End-Run around Pharmaceutical Method of Use Patents? by Herman H. Yue & John D. Garretson

FDLI july-2015 Update Cover Final Design.indd 6 7/8/15 3:57 PM State Regulation of Medical Device Distribution: Managing a Complex Regulatory Scheme

By Michele L. Buenafe

lthough most medical device companies focus the nationally. Currently, approximately half of the 50 states bulk of their regulatory resources on compliance regulate the distribution of devices, but the laws regulating Awith federal requirements imposed by the Food device distribution vary from state to state. These state laws and Drug Administration (FDA), a significant portion differ, for example, in the types of device products that of device regulation falls within the purview of state are subject to regulation; the activities and entities that are agencies, particularly with respect to device distribution. subject to regulation; the requirements for licensure; and the requirements related to facilities, processes, and quality State regulation in this area has long been a significant controls. Federal guidelines for wholesale drug distributors, burden for companies that market and distribute devices mandated by the Prescription Drug Marketing Act (PDMA), have helped to establish a level of consistency among the Michele L. Buenafe is an associate at state laws and regulations governing prescription drug Morgan, Lewis & Bockius, LLP in the FDA distribution, but no such guidelines have been established for practice group. Her practice focuses on medical devices. the federal and state regulatory issues related to the manufacture, distribution, The patchwork of state laws and regulations applicable to and marketing of medical devices, digital device distribution has presented a tremendous challenge health technologies, pharmaceuticals, controlled substances, human tissue for device manufacturers and distributors, particularly products, and combination products. given that, unlike the drug industry, most device companies

FDLI July/August 2015 Update 21 Medical Devices

are in the small to mid-sized range. requirements applicable to device the responsibilities in this area (e.g., These complexities become even more distribution. California and Pennsylvania). Device difficult to manage with the increased There are also significant differences companies, therefore, must ensure they use of national carriers, as device in how each state interprets and contact the correct regulatory agency companies seek to reduce costs by enforces its laws related to device (or agencies) in each state when seeking downsizing their sales force. In the distribution. In some states, for clarification on the applicability of absence of federal legislation to provide example, although the state laws and the state’s regulatory and licensure more uniformity, device companies regulations allow the state regulators requirements. must continue to be mindful of to oversee device distribution the various state requirements and activities and to require licensure for Scope of States’ maintain systems and processes to entities engaged in such activities, Regulation for Device manage their regulatory obligations. the state regulators have chosen as Distribution a matter of policy not to enforce After determining whether a state Managing the Challenges these requirements due to a lack of actively regulates and enforces device Presented in Evaluating resources. This has created an added distribution laws and regulations, State Regulatory layer of confusion and complexity for device companies must then assess Requirements device manufacturers and wholesalers the scope of each state’s regulatory The number of states that have laws seeking to determine their regulatory requirements, and whether it falls or regulations governing medical and licensure obligations, because within that scope. One of the first device distribution—approximately these state regulators do not always questions that should be considered half—has remained relatively constant announce their enforcement policy is the type of devices subject to over the last several years. However, (e.g., in a written guidance, on the state regulation by the state. Most states that there are significant differences in how regulator’s website, or in any other regulate device distribution regulate each state regulates device distribution written regulatory document). In many only prescription or “legend” devices, activities. Moreover, in those states cases, device distributors only learn but the states differ in how they define that choose to regulate in this area, about a state’s enforcement policy by these terms. For device manufacturers devices are often treated almost as contacting the relevant state regulatory familiar with FDA regulatory an afterthought. Very few states have authority directly. requirements, these differences in a regulatory framework designed Thus, prior to launching a device definitions can be perplexing. For specifically for medical devices. product for the first time, it is example, the New York Board of Rather, working under the apparent important that device companies Pharmacy distinguishes between assumption that drugs and devices are take the time not only to evaluate the products labeled as (1) “Federal generally the same or “close enough,” specific state laws and regulations law prohibits dispensing without a these states use legal and regulatory applicable to device distribution, prescription” or “Rx only,” and (2) schemes that were designed for the but also to ensure they understand those labeled as “Federal law restricts pharmaceutical industry to regulate how those laws and regulations are this device to sale by or on the order of medical devices. This, combined enforced in each state. With respect to a physician.” Although FDA considers with the variability among the states the latter step, device companies may both types of label statements to be in the degree of device regulation have difficulties in determining which applicable to prescription devices, and regulators’ understanding of the state regulatory authority to contact. the New York Board of Pharmacy device industry, can create significant Although most states regulate device considers devices labeled with the challenges. Device companies, distribution through the state Board former language to be prescription therefore, must be prepared to manage of Pharmacy or Board of Wholesale devices (subject to regulation and the inherent limitations of these state Distributors, some states utilize licensure requirements) and the latter regulatory schemes, and the differences an FDA-like agency, while others to be non-prescription (not subject to among the states in the regulatory have multiple agencies that share regulation or licensure requirements).

22 Update July/August 2015 www.fdli.org Medical Devices

In addition, some states only only distribute devices of their own a market launch. Additionally, some regulate a subset of prescription manufacture. states (e.g., Georgia) require applicants devices that are considered “durable to provide verification of every state in medical equipment” or “home medical State Licensure which the distributor is licensed. Thus, equipment.” These device categories Requirements it may be easier to obtain licensure in these states earlier in the process, when generally include equipment that has One of the most important the distributor has only a few state been prescribed by a physician for considerations for device distributors licenses. use in the home (e.g., hospital beds, in assessing their state regulatory sleep apnea devices, infusion pumps, obligations is the state licensure or walkers). Thus, a device company may registration requirements. Advance Facility and Related not be required to obtain a license in planning is critical for companies Requirements certain states if the company’s devices launching their first device product, Beyond licensure, device distributors do not qualify as durable or home due to the lead time needed in some also will need to understand and medical equipment. states to provide all the supporting manage the various state requirements Device distributors also need to documentation and information related to facility controls, quality assess whether the activities they required for the license application. For controls, personnel, security, record- engage in within a state are subject example, some states (e.g., California keeping, and supplier/customer to regulation. Some states only and Maryland) require fingerprints diligence (i.e., confirmation that regulate entities engaged in wholesale and background checks for certain suppliers and customers are distribution activities (i.e., distribution employees, and a few states require a appropriately licensed to sell or to hospitals, clinics, retailers, and $100,000 surety bond (e.g., Arizona). purchase medical devices). These not to individual patients), while Several states require an inspection requirements also vary from state to others regulate only retailers and or a recent inspection report before state, with some states imposing more other entities that dispense directly approving a license/registration detailed and onerous obligations, and to patients. Further, for those states application. Maryland requires out-of- others having more general and flexible state facilities to either be accredited requirements. regulating wholesale distributors, under the Verified-Accredited Device companies engaged some regulate only the entity that Wholesale Distributors (VAWD) in distribution must draft and holds title to the devices when they are program by the National Association implement appropriate procedures distributed into the state. Other states, of Boards of Pharmacy (NABP), or and processes to ensure compliance such as California, regulate not only to have had an inspection by a state with these state requirements prior device distributors, but also third-party agency that Maryland has determined to beginning any device distribution logistics providers that provide only has an acceptable inspection program. activities (e.g., for quality control, warehousing and logistics services, For distributors seeking to distribute environmental monitoring, first-in- and do not take title to the devices devices in all 50 states plus the District first-out requirements, monitoring of that they handle. And at least one of Columbia, the order in which expiration dates, complaint handling, state (Pennsylvania) requires a device license applications are submitted returned products, and recordkeeping). distributor to register with the state can be important. For example, when This is particularly important if the only if it employs sales representatives obtaining nonresident licenses to distribution facility is located in a state in the state. ship into other states, most states that requires an inspection prior to Device companies also must require that a distributor first obtain a licensure. Additionally, distributors consider whether any regulatory license in its home state before it can must ensure their distribution exemptions may apply. For example, apply for the nonresident license. If warehouses are of adequate size and many states exempt FDA-registered a distributor’s home state is one that construction, have a separate area device manufacturers from oversight, has a long processing period, this can for quarantined products, and have provided that the manufacturers significantly lengthen the timeline for appropriate security controls. Some

FDLI July/August 2015 Update 23 Medical Devices

states (e.g., Arizona and Montana) drafted by the House Energy and third-party logistics providers and require distributors to submit a Commerce Committee, referred to dispensers, and also would require floor plan of the facility with their as the “21st Century Cures Act.” An FDA to issue regulations defining license application to demonstrate earlier draft of this proposed legislation standards for licensing wholesale that the applicant meets the state’s included a section entitled the “Device distributors and third-party logistics requirements related to facility and Distribution Licensing Act of 2015,” providers that handle prescription security controls. Distributors also which was proposed and supported by medical devices. must evaluate whether there are a coalition of device distributors. The specific state requirements relevant most recent version of the 21st Century Conclusion to personnel, such as requiring that Cures Act did not include these Compliance with state device personnel handling prescription provisions. distribution laws and regulations devices have adequate training, If enacted, the proposed Device remains a challenge for companies technical qualifications, education, and Distribution Licensing Act would distributing prescription devices experience. Certain states also require significantly impact the state license to all 50 states. To manage these a designated representative or other requirements for prescription device requirements, advance planning is licensed person at each facility (e.g., manufacturers, distributors, and third- key, and must include developing Maryland and Utah). party logistics providers, as it would a good understanding of the state create a closed distribution chain for requirements applicable to your Potential Federal prescription medical devices, modeled devices. While federal legislation, such Legislation after the one created for prescription as the Device Distribution Licensing One issue that many device drug distribution under the Drug Act, still could be revived and offer distributors have been following closely Quality and Security Act of 2013. It some level of uniformity for device is the potential for federal legislation would impose licensure and other distributors in the future, it does not in this area. In particular, distributors requirements for prescription device appear that such relief will be available

have been keeping an eye on legislation manufacturers, wholesale distributors, soon. FDLI

24 Update July/August 2015 www.fdli.org