67720 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations ranging from 3 to 8 years on which the contrary to the public interest. We have List of Subjects in 20 CFR Part 404 various body system listings would no determined that, under 5 U.S.C. Administrative practice and longer be effective unless extended by 553(b)(B), good cause exists for procedure, Blind, Disability benefits, the Secretary of Health and Human dispensing with the notice and public Old-Age, Survivors and Disability Services or revised and promulgated comment procedures in this case. Good Insurance, Reporting and recordkeeping again. Effective March 31, 1995, the cause exists because this regulation only requirements, Social Security. authority to issue regulations was extends the date on which these body transferred to the Commissioner of system listings will no longer be Dated: November 24, 1999. Social Security by section 102 of Public effective. It makes no substantive Kenneth S. Apfel, Law 103–296, the Social Security changes to those listings. The current Commissioner of Social Security. Independence and Program regulations expressly provide that For the reasons set forth in the Improvements Act of 1994. listings may be extended, as well as preamble, part 404, subpart P, chapter In this final rule, we are extending the revised and promulgated again. III of title 20 of the Code of Federal dates on which several body system Therefore, opportunity for prior Regulations is amended as set forth listings will no longer be effective to comment is unnecessary, and we are below. July 2, 2001. These body systems are: issuing this regulation as a final rule. PART 404ÐFEDERAL OLD-AGE, Cardiovascular System (4.00 and In addition, we find good cause for SURVIVORS AND DISABILITY 104.00). dispensing with the 30-day delay in the INSURANCE (1950- ) Digestive System (5.00 and 105.00). effective date of a substantive rule Genito-Urinary System (6.00 and provided by 5 U.S.C. 553(d). As Subpart PÐ[Amended] 106.00). explained above, we are not making any We last extended the dates on which substantive changes in these body 1. The authority citation for subpart P these body system listings would no system listings. However, without an of part 404 continues to read as follows: longer be effective in final rules extension of the expiration dates for Authority: Secs. 202, 205(a), (b), and (d)– published as follows: these listings, we will lack regulatory (h), 216(i), 221(a) and (i), 222(c), 223, 225, June 5, 1997 (62 FR 30746): Digestive guidelines for assessing impairments in and 702(a)(5) of the Social Security Act (42 System and Genito-Urinary System. these body systems at the third step of U.S.C. 402, 405(a), (b), and (d)–(h), 416(i), the sequential evaluation process after 421(a) and (i), 422(c), 423, 425, and January 30, 1998 (63 FR 4570): 902(a)(5)); sec. 211(b), Pub. L. 104–193, 110 Cardiovascular System. the current expiration dates of these listings. In order to ensure that we Stat. 2105, 2189. We believe that the requirements in continue to have regulatory criteria for 2. Appendix 1 to subpart P of part 404 these listings are still valid for our assessing impairments under these is amended by revising items 5, 6, and program purposes. Specifically, if we listings, we find that it is in the public 7 of the introductory text before Part A find that an individual has an interest to make this rule effective upon to read as follows: impairment that meets or is medically publication. equivalent in severity to an impairment Appendix 1 to Subpart P—Listing of in the Listings or functionally Executive Order 12866 Impairments equivalent to the Listings in SSI claims We have consulted with the Office of * * * * * based on disability filed by individuals Management and Budget (OMB) and 5. Cardiovascular System (4.00 and 104.00): under age 18 and also meets the July 2, 2001. determined that this final rule does not statutory duration requirement, we will 6. Digestive System (5.00 and 105.00): July 2, meet the criteria for a significant find that the individual is disabled at 2001. regulatory action under Executive Order the third step of the sequential 7. Genito-Urinary System (6.00 and 106.00): 12866. Thus, it was not subject to OMB July 2, 2001. evaluation process. We are extending review. We have also determined that these dates because we do not expect to * * * * * this final rule meets the plain language develop revised listings criteria for these [FR Doc. 99–31322 Filed 12–2–99; 8:45 am] requirement of Executive Order 12866 body systems by the expiration dates BILLING CODE 4191±02±P and the President’s memorandum of currently shown in the regulations. June 1, 1998 (63 FR 31885). However, we are reviewing the listings and we plan to publish proposed and Regulatory Flexibility Act DEPARTMENT OF HEALTH AND final rules over the course of the next HUMAN SERVICES We certify that this final regulation two years. will not have a significant economic Food and Drug Administration Regulatory Procedures impact on a substantial number of small entities. Therefore, a regulatory 21 CFR Parts 203 and 205 Justification for Final Rule flexibility analysis as provided in the [Docket Nos. 92N±0297 and 88N±0258] Pursuant to section 702(a)(5) of the Regulatory Flexibility Act, as amended, Social Security Act, 42 U.S.C. 902(a)(5), is not required. RIN 0910±AA08 as amended by section 102 of Public Law 103–296, SSA follows the Paperwork Reduction Act Prescription Drug Marketing Act of 1987; Prescription Drug Amendments Administrative Procedure Act (APA) This final regulation imposes no of 1992; Policies, Requirements, and rulemaking procedures specified in 5 reporting/recordkeeping requirements Administrative Procedures U.S.C. 553 in the development of its necessitating clearance by OMB. regulations. The APA provides (Catalog of Federal Domestic Assistance AGENCY: Food and Drug Administration, exceptions to its notice and public Program Nos. 96.001, Social Security- HHS. comment procedures when an agency Disability Insurance; 96.002, Social Security- ACTION: Final rule. finds there is good cause for dispensing Retirement Insurance; 96.004, Social with such procedures on the basis that Security-Survivors Insurance; 96.006, SUMMARY: The Food and Drug they are impracticable, unnecessary, or Supplemental Security Income) Administration (FDA) is issuing a final

VerDate 29-OCT-99 19:12 Dec 02, 1999 Jkt 190000 PO 00000 Frm 00028 Fmt 4700 Sfmt 4700 E:\FR\FM\03DER1.XXX pfrm08 PsN: 03DER1 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations 67721 rule to set forth procedures and PDMA, as modified by the PDA, 1994 proposal called for the submission requirements implementing the amended sections 301, 303, 503, and of comments by May 30, 1994. At the Prescription Drug Marketing Act of 1987 801 of the Federal Food, Drug, and request of certain individuals, the (PDMA), as modified by the Prescription Cosmetic Act (the act) (21 U.S.C. 331, comment period was extended, by Drug Amendments of 1992 (PDA) and 333, 353, 381) to establish restrictions notice in the Federal Register of July 15, the FDA Modernization Act of 1997 (the and requirements relating to various 1994 (59 FR 36107), to August 15, 1994. Modernization Act). The final rule sets aspects of human prescription drug After careful consideration of the forth requirements for the reimportation marketing and distribution. Among comments, the agency has revised and and wholesale distribution of other things, PDMA: (1) Banned the finalized the March 1994 proposal. A prescription drugs; the sale, purchase, sale, purchase, or trade of (or offer to discussion of significant issues, the or trade of, or the offer to sell, purchase, sell, purchase, or trade) drug samples comments received on the proposal, and or trade, prescription drugs that were and drug coupons; (2) restricted the agency’s responses to the comments purchased by hospitals or health care reimportation of prescription drugs to follows. entities, or donated to charitable the manufacturer of the drug product or II. Significant Issues and Revisions to organizations; and the distribution of for emergency medical care; (3) the Proposal prescription drug samples. FDA is also established requirements for drug amending certain sections of the sample distribution and the storage and A. Reimportation of Drugs Composed regulations entitled ‘‘Guidelines for handling of drug samples; (4) required Wholly or Partly of Insulin wholesale distributors of prescription State Licensing of Wholesale On November 21, 1997, the Prescription Drug Distributors’’ to make drugs to be State licensed and required FDA to establish minimum Modernization Act (Public Law 105– them consistent with this final 115) was enacted. Section 125(a)(2)(D) regulation. requirements for State licensing schemes; (5) established requirements of the Modernization Act amended DATES: Submit written comments on the section 801(d)(1) of the act to prohibit collection of information provisions by for wholesale distribution of prescription drugs by unauthorized the reimportation of a drug composed February 1, 2000. This regulation is wholly or partly of insulin, except by effective December 4, 2000. distributors; (6) prohibited, with certain exceptions, the sale, purchase, or trade the manufacturer of the drug or for ADDRESSES: Submit written comments emergency care. In accordance with the on the collection of information to the (or offer to sell, purchase, or trade) of prescription drugs that were purchased revised statutory requirement, the Dockets Management Branch (HFA– agency has revised proposed §§ 203.10 305), Food and Drug Administration, by hospitals or health care entities, or donated or supplied at a reduced price and 203.12 (21 CFR 203.10 and 203.12) 5630 Fishers Lane, rm. 1061, Rockville, to charities; and (7) established criminal in the final rule to include insulin- MD 20857. All comments should be and civil penalties for PDMA violations. containing drugs. identified with the docket number In the Federal Register of September found in brackets in the heading of this B. Blood and Blood Components 13, 1988 (53 FR 35325), FDA published Intended for Transfusion document. a proposed rule containing minimum FOR FURTHER INFORMATION CONTACT: requirements for State licensing of In the State licensing guideline final For information on the PDMA and wholesale drug distributors. The final rule, FDA excluded from the definition regulations: Lee D. Korb, Center for rule on State licensing requirements of ‘‘wholesale distribution’’ the sale, Drug Evaluation and Research (part 205 (21 CFR part 205)) was purchase, or trade of blood and blood (HFD–7), Food and Drug published in the Federal Register of components intended for transfusion Administration, 5600 Fishers Lane, September 14, 1990 (55 FR 38012) (see § 205.3(f)(8)). Thus, persons Rockville, MD 20857, 301–594– (hereinafter referred to as the State engaged in the distribution of blood or 2041, e-mail address via Internet: licensing guideline final rule). The State blood components intended for ‘‘[email protected]’’. licensing regulations require that all transfusion are not required to be State For information on compliance with wholesale distributors be State licensed, licensed wholesale prescription drug and enforcement of the regulations: establish minimum qualifications for distributors or to comply with other part Margaret M. O’Rourke, Center for licensees, and set forth minimum 205 requirements. Drug Evaluation and Research requirements for the storage and Concurrent with the State licensing (HFD–330), Food and Drug handling of prescription drugs and for guideline final rule, FDA published a Administration, 7500 Standish Pl., the establishment and maintenance of proposed rule entitled ‘‘Applicability to Rockville, MD 20855, 301–594– records of drug distribution by Blood and Blood Components Intended 0101, e-mail address via Internet: wholesale distributors. for Transfusion; Guidelines for State ‘‘[email protected]’’. In the Federal Register of March 14, Licensing of Wholesale Prescription For information on biologics: Steven 1994 (59 FR 11842), FDA issued a Drug Distributors’’ (55 FR 38027) F. Falter, Center for Biologics proposed rule to set forth agency (hereinafter referred to as the September Evaluation and Research (HFM–17), policies and requirements for those 1990 proposal). In that proposal, FDA: Food and Drug Administration, sections of PDMA not related to State (1) Tentatively concluded that PDMA 1401 Rockville Pike, Rockville, MD licensing of wholesale distributors does not apply to the distribution of 20852, 301–827–6210, e-mail (hereinafter referred to as the March blood and blood components intended address via Internet: 1994 proposal). The March 1994 for transfusion, (2) set forth its rationale ‘‘[email protected]’’. proposal contained provisions on for its tentative conclusion, and (3) SUPPLEMENTARY INFORMATION: prescription drug reimportation, solicited comments. The agency stated wholesale distribution of prescription that, if comments persuaded FDA that I. Background drugs by unauthorized distributors, the PDMA should be interpreted as PDMA (Public Law 100–293) was resale of prescription drugs by hospitals, applying to the distribution of blood enacted on April 22, 1988, and was health care entities, and charitable and blood components intended for modified by the PDA (Public Law 102– institutions, and distribution of transfusion, FDA would amend the 353, 106 Stat. 941) on August 26, 1992. prescription drug samples. The March State licensing guideline final rule.

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Comments received on the proposal and medical air, USP) are prescription proposed in § 203.31(d) to require that supported the exclusion, however, and drugs within the scope of PDMA and manufacturers and distributors conduct no action has been taken by the agency the State licensing guideline final rule. a ‘‘complete and accurate drug sample to amend part 205. Therefore, under § 205.4, all persons inventory’’ at least annually of all drug FDA again tentatively concluded in engaged in the wholesale distribution of samples in the possession or control of the March 1994 proposal (59 FR 11842 medical gases must be State licensed. each manufacturer’s and distributor’s at 11844) that the restrictions in and the This includes all air separation plants representatives using ‘‘generally requirements of PDMA do not apply to and units, suppliers, welding firms, accepted inventory practices.’’ In the distribution of blood and blood durable medical equipment suppliers, addition, FDA proposed to require that components intended for transfusion. and home respiratory care companies the results of the inventory be ‘‘recorded Proposed §§ 203.1 and 203.3(v) (21 CFR that distribute medical gases, except for in an inventory record and 203.1 and 203.3(v)) specified that blood those entities that exclusively distribute reconciliation report.’’ and blood components intended for medical gases to patients under a valid Under proposed § 203.31(d)(1), the transfusion are outside the scope of prescription (see § 205.3(f)(6)). In inventory record would identify all drug PDMA, and do not constitute addition, distributors of medical gases samples by the proprietary or ‘‘prescription drugs’’ for the purposes of are subject to all other restrictions and established name, dosage strength, and part 203 (21 CFR part 203). In addition, requirements under PDMA and this number of sample units in stock. Under proposed § 203.22(g) specifically final rule, including the requirement proposed § 203.31(d)(2), the excluded the sale, purchase, or trade of, under § 203.50 to provide a drug origin reconciliation report would contain a or offer to sell, purchase, or trade blood statement and the requirements for drug report of the physical count of the most or blood components intended for sample distribution. The agency notes, recently completed prior inventory, a transfusion from the sales restrictions in however, that because most distributors record of each drug sample received proposed § 203.20. No comments of medical gases qualify as since the most recently completed prior opposing the proposed sections were manufacturers under § 203.3(s), the inventory, a record of each drug sample received. requirement to provide a drug origin distributed since the most recently Based on the rationale set forth in the statement will generally not apply to completed prior inventory, and an September 1990 proposal, the agency such distributors. In addition, the explanation for any significant loss. has made a final determination that agency is unaware of the practice of Under proposed § 203.31(d)(3), the blood and blood components intended providing samples of medical gases to inventory would be conducted, and the for transfusion should be excluded from licensed practitioners. Therefore, the inventory and reconciliation reports all of the restrictions in and the drug sample provisions of PDMA and would be prepared by persons other requirements of PDMA. Accordingly, this final rule should have no practical than the representatives being proposed §§ 203.1, 203.3(v), and applicability to the medical gas inventoried or supervisors or managers 203.22(g) are being finalized, and the industry. in their department, division, or branch, September 1990 proposal (Docket No. or in their direct line of supervision or 88N–0258)is not being adopted. D. Revision to Proposed 203.3(e) command. As discussed in section III.B of this In proposed § 203.3(e), the term ‘‘bulk The agency has revised proposed document in conjunction with drug substance’’ was defined to mean: § 203.31(d) in the final rule to clarify comments received on the proposed Any drug or drug component furnished in certain requirements. The introductory rule, blood and blood components other than finished dosage form that is paragraph of § 203.31(d) has been intended for transfusion include whole intended to furnish pharmacological activity revised to specify that a ‘‘physical blood, red blood cells, plasma, fresh or other direct effect in the diagnosis, cure, inventory’’ of drug samples is required, frozen plasma, cryoprecipitated AHF, mitigation, treatment, or prevention of rather than an inventory. The term and platelets. Blood derivatives such as disease, or to affect the structure or function ‘‘physical inventory’’ has been added to Factor IX, Factor IX Complex, and of the body of humans. more clearly distinguish the inventory immune globulin, as well as In § 207.3(a)(4) (21 CFR 207.3(a)(4), the from the reconciliation process and to recombinant products regulated as term is defined to mean: clarify that the required inventory Any substance that is represented for use consists of a physical count of stock on biological products, are not blood or in a drug and that, when used in the blood components intended for manufacturing, processing, or packaging of a hand. The proposed requirement that transfusion and, therefore, are subject to drug, becomes an active ingredient or a the inventory be conducted ‘‘using the requirements and restrictions of finished dosage form of the drug, but the generally accepted inventory practices’’ PDMA. term does not include intermediates used in has been deleted in the final rule the synthesis of such substances. because the agency has determined that C. Medical Gases Although the definitions are similar, the there are no generally recognized In the March 1994 proposal (59 FR agency has decided that it is appropriate standards for conducting a physical 11842 at 11844), the agency clarified to use identical definitions of bulk drug count. The final rule has also been that oxygen, USP (United States substance throughout the regulations. revised to clarify that the results of the Pharmacopeia), is a prescription drug Accordingly, the final rule adopts the physical count must be recorded in the subject to section 503(b) of the act and, definition of bulk drug substance used inventory record, not in the inventory therefore, within the scope of PDMA in § 207.3(a)(4). record and reconciliation report. The and the proposed regulations. Since the proposed requirements for the inventory publication of the March 1994 proposal, E. Revisions to Proposed § 203.31(d) record remain unchanged. questions have been raised about the For drug samples delivered by In contrast to the relatively simple applicability of PDMA to medical gases representatives, PDMA provides that a task of conducting a physical count, the generally. manufacturer or distributor is required reconciliation process involves FDA advises that all medical gases to conduct a complete and accurate comparing the latest inventory to the (i.e., oxygen, USP; nitrogen, NF inventory of all drug samples in the most recent prior inventory and taking (National Formulary); nitrous oxide, possession of representatives at least into account drug samples acquired and USP; carbon dioxide, USP; helium USP; annually (21 U.S.C. 353(d)(3)(C)). FDA distributed in the interim, to determine

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The agency to facilitate detection of diversion representative’s department, division, or recognized the importance of this activity, and conducting a physical branch, or in the representative’s direct practice to the operations of such inventory without reconciling that line of supervision. Instead, institutions and to the goal of providing inventory with the most recent prior manufacturers and authorized adequate medical care to patients in inventory would not achieve this goal distributors are required to take need, but also expressed concern that (59 FR 11842 at 11849). Thus, the appropriate internal control measures to the practice may make enforcement of introductory paragraph of proposed guard against error and possible fraud in the sample distribution provisions of § 203.31(d) has been revised in the final the conduct of the physical inventory PDMA difficult and provide an avenue rule to clarify that, in addition to a and reconciliation, and in the for drug diversion. The agency physical inventory, manufacturers and preparation of the inventory record and tentatively concluded that charitable distributors are required to reconcile the reconciliation report. donations of drug samples is results of the physical inventory with permissible under PDMA, provided that F. Elimination of § 203.31(f) the most recently completed prior a system of controls is in place to physical inventory and to document this Proposed § 203.31(f) has been provide accountability and oversight process in a reconciliation report. removed from the final rule. The over such donations and to minimize The agency has revised proposed proposed section contained the same the potential for drug diversion. The § 203.31(d)(2)(i) in the final rule to requirement for a manufacturer or agency proposed a system of drug require that the reconciliation report authorized distributor to notify FDA of sample donation controls in § 203.39. include the inventory record for the any conviction of its representatives as Although no comments were most recently completed prior proposed in § 203.37(c) and finalized in submitted concerning the provisions in inventory. This is the same as the the rulemaking. § 203.39, the agency has determined that requirement in proposed G.Revisions to Proposed § 203.34 some of the proposed requirements are § 203.31(d)(2)(i) for a ‘‘report of the burdensome and unnecessary to ensure physical count of the most recently Proposed § 203.34(b), (c), (d), and (g) accountability and oversight over completed prior inventory,’’ but the have been revised and renumbered in donated drug samples. Accordingly, the terminology is clearer and consistent the final rule as § 203.34(b)(1) through agency has revised the proposed with the terminology used in (b)(4). Proposed § 203.34(d) is being requirements as follows. § 203.31(d)(1). finalized as § 203.34(b)(1) and has been Proposed § 203.39(a)(1) and (a)(2), Proposed § 203.31(d)(2)(iii) has been revised to clarify that a manufacturer or which required that charitable revised in the final rule to clarify the authorized distributor must have institutions that receive drug sample types of transactions that the agency written policies and procedures donations be licensed by the State, if considers to be ‘‘distributions.’’ This detailing its methodology for required by State law, and enrolled with clarification is necessary because a reconciling sample requests and receipts FDA, have been eliminated. Regarding representative’s stock of drug samples and for determining if patterns of the elimination of proposed may be affected by various types of nonresponse exist that may indicate § 203.39(a)(1), the agency notes that dispositions other than distributions to sample diversion. In addition, written charitable institutions are still required health care practitioners or their policies and procedures must detail to comply with applicable State law in designees, and it is necessary that the how a manufacturer or authorized their operations. However, the agency reconciliation report reflect these distributor will initiate investigations or believes that it is appropriate to defer different types of dispositions so that an otherwise respond when patterns of licensure or other State requirements to accurate assessment of potential drug nonreturns of sample receipts are found. the States. Proposed § 203.39(b)(1), diversion activity can be made. Section Proposed § 203.34(c) is being finalized which required charitable institutions to 203.31(d)(2)(iv), which requires a record as § 203.34(b)(2) and has been revised to provide documentation demonstrating of drug sample thefts or significant cover the preparation of the that their agents are authorized to solicit losses reported by the representative reconciliation report as well as the or receive drug sample donations, and since the most recently completed prior conduct of the physical inventory. proposed § 203.39(b)(2), which required inventory, has been added for the same Proposed § 203.34(b) is being finalized charitable institutions to maintain a list reason. as § 203.34(b)(3) and has been revised to of agents authorized to solicit or receive Section 203.31(d)(2)(v), which require manufacturers and distributors drug sample donations, have also been requires a summary record of the to establish and adhere to written eliminated. information contained in policies describing their administrative Proposed § 203.39(b)(8), which § 203.31(d)(2)(ii) through (d)(2)(iv), has systems for conducting random and for- required the donor of a drug sample to been added in the final rule. The cause audits of sales representatives. prepare a donation record for drug summary record will permit The necessity for such audits is samples delivered by mail or common manufacturers and authorized discussed in conjunction with carrier, has been eliminated. Under distributors of record and the agency to comments on proposed § 203.31(d). § 203.39(e) of the final rule, the quickly review the information that is charitable institution to which a drug necessary to conduct a reconciliation H. Charitable Donations of Prescription sample is donated must prepare a and thus will help to facilitate checking Drug Samples donation record for the sample the accuracy of reconciliations. In the preamble to the March 1994 regardless of the manner of delivery of Finally, as discussed in section III.E of proposal (59 FR 11842 at 11853), the the drug sample and must retain the this document in conjunction with the agency addressed the practice whereby record for at least 3 years. Proposed comments, proposed § 203.31(d)(3) has licensed practitioners donate § 203.39(b)(9) has been revised to been substantially revised in the final prescription drug samples to charitable require that the donation record contain

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Revised donation. reports, records, and other documents § 203.60(a)(1) states that electronic Proposed § 203.39(b)(11) has been required under PDMA and part 203. records, electronic signatures, and handwritten signatures executed to revised to eliminate the proposed Proposed § 203.60(a) permitted any electronic records may be used in lieu requirement that the inventory of required document to be created either of paper records and handwritten donated drug samples in the possession on paper or on electronic media. signatures executed on paper to meet of a charitable institution be conducted Proposed § 203.60(b) permitted any any of the record and signature using independent inventory personnel. required document created on paper to be maintained on paper or by requirements of PDMA or part 203, Proposed § 203.39(b)(12), which provided that the requirements of part required that a charitable institution photographic or electronic imaging, provided the security and 11 are met. Although electronic provide written certification to the signatures, electronic records, and donating party that it is in compliance authentication requirements in § 203.60(d) were met. Proposed handwritten signatures executed on with part 203, has been eliminated in electronic records would be permitted the final rule. Finally, proposed § 203.60(c) permitted required documents created electronically to be to meet PDMA and part 203 records and § 203.39(c) has been eliminated, but its signature requirements under the requirements have been incorporated stored using computer technologies, provided the requirements in provisions of part 11 without further into the introductory paragraph of § 203.60(d) were met. Proposed rulemaking in part 203 (see, e.g., § 11.1), § 203.39 such that charitable institutions § 203.60(d) provided that required this section has been included in the may donate donated drug samples to documents and signatures must be final rule for added clarity. The final other charitable institutions as long as created, maintained, or transmitted in a rule also defines the terms electronic § 203.39 is followed. form providing reasonable assurance of record, electronic signature, and I. Charitable Donations of Prescription being: (1) Resistant to tampering, handwritten signature in revised Drugs Generally revision, modification, fraud, § 203.3(k), (l), and (p), respectively, to unauthorized use, or alteration; (2) have the same meaning that these terms Since the publication of the March preserved in accessible and retrievable have in § 11.3(b)(6), (b)(7), and (b)(8). 1994 proposal, the agency has received fashion; and (3) visible or readily made Revised § 203.60(a)(2) permits requests that raise questions about visible for purposes of review by combinations of paper records and whether and how PDMA should be regulated industry and FDA. electronic records, electronic records applied to charitable donations of In addition to the requirements in and handwritten signatures executed on prescription drugs generally, not just proposed § 203.60, proposed § 203.61 paper, and paper records and electronic drug samples. Nonsample drug products permitted signatures on required forms, signatures or handwritten signatures may be donated to charitable reports, and records to be made by executed to electronic records to be institutions from many different means of a writing or marking used to meet PDMA record and sources, including manufacturers, instrument such as a pen or indelible signature requirements, provided that wholesale distributors, retail pencil. The section also permitted the requirements of part 11 are met for pharmacies, for profit and nonprofit signatures to be made by electronic the electronic component. In addition, a hospitals and health care entities, other stylus on an electronic pad or by other reasonably secure link must exist charitable groups, and reverse electronic medium, provided the between the paper-based and electronic distributors (i.e., wholesale distributors security requirements in § 203.61(b) components to ensure that the that handle returns). In addition, FDA is were met. combined records and signatures are aware that drug salvagers may also be a In the Federal Register of March 20, trustworthy and reliable and the signer source of donations. 1997 (62 FR 13430), the agency issued cannot readily repudiate the signed final regulations on electronic records record as not genuine. A reasonably The donation of nonsample drug and electronic signatures in part 11 (21 secure link could consist of a physical products to charitable institutions raises CFR part 11). Because of the issuance of link between the electronic and paper- similar concerns about the quality of the those regulations and the applicability based records (i.e., where the paper- drugs being donated and potential drug of part 11 to part 203 document and based record(s) and a computer disk diversion as the donation of drug signature requirements, the March 1994 containing the electronic record(s) are samples. Moreover, such donations proposal has been substantially revised. sealed together in a container and a constitute distribution of a prescription Under part 11, electronic records, chain of controlled custody for the drug to other than a consumer or patient electronic signatures, and handwritten sealed container is established) or a and therefore could be considered signatures executed to electronic technology-based link. The agency is ‘‘wholesale distribution’’ under section records that meet the requirements of planning to issue in the future further 503(e)(4)(B) of the act. Although the that part may be used to meet guidance on technology-based links in agency is not establishing controls for requirements to create and maintain conjunction with its implementation of nonsample prescription drug donations records and signatures under the act and part 11. at this time, the agency is carefully agency regulations, unless specifically Revised § 203.60(a)(3) clarifies that considering the relevant issues and may excepted by future regulations. the ‘‘record and signature requirements’’ in the future propose an approach to Therefore, sections of the March 1994 to which § 203.60(a)(1) and (a)(2) refer drug donations that encompasses both proposal setting forth requirements include drug sample request and receipt prescription drug samples and relating to creation and maintenance of forms, reports, records, and any other nonsample prescription drug products. electronic records, electronic signatures, types of documents and their associated

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The section has been industry’s ability to track sample defined ‘‘distribute’’ to mean to sell, revised, however, to clarify that distribution and reduce the possibility offer to sell, deliver, or offer to deliver electronic scanning of paper records of diversion of samples.’’ a drug to a recipient, except that the into a computer creates an electronic A large number of comments term ‘‘distribute’’ does not include the record that is subject to the addressed the provisions of the providing of a drug sample to a patient requirements of part 11. The security proposed rule relating to sample by: and authentication requirements in distribution. In fact, comments were (1) A practitioner licensed to proposed § 203.60(d) have been received on almost all of the sections of prescribe such drug, renumbered in the final rule as the proposed rule dealing with sample (2) A health care professional acting at § 203.60(c) and revised such that the distribution. Most of these comments the direction and under the supervision requirements in the section apply only were critical of the manner in which the of such a practitioner, or to documents and signatures that are agency proposed to implement the (3) The pharmacy of a hospital or of created on paper and that are sample distribution requirements another health care entity that is acting maintained by photographic imaging or contained in PDMA. In addition to at the direction of such a practitioner transmitted electronically. Minor comments on sample distribution, and that received such sample in revisions have also been made to the comments were received on sections of accordance with the act and regulations. security and authentication the proposed rule relating to On its own initiative, the agency is requirements in revised § 203.60(d)(3). reimportation of prescription drugs, revising proposed § 203.3(h) in the final The requirements for maintenance of resales of prescription drugs purchased rule to specify that the term ‘‘distribute’’ documents created by electronic means by health care entities, recordkeeping does not include the delivery of drugs in proposed § 203.60(c) and the and investigation requirements, and or offer to deliver drugs by a common signature requirements in proposed wholesale distribution. carrier in the usual course of its § 203.61 have been superseded by part Specific issues raised by the business as a common carrier. This 11 requirements. Therefore, these comments and the agency’s responses revision is necessary to permit common sections have been deleted in their follow. carriers that deliver drug samples, or entirety in the final rule. Proposed B. Definitions perform duties incidental to delivery § 203.60(e) and (f) have been Blood component. Proposed (i.e., delivery verification) for renumbered in the final rule as § 203.3(d) defined ‘‘blood component’’ manufacturers or authorized distributors § 203.60(d) and (e). as ‘‘that part of a single-donor unit of of record, to do so without being blood separated by physical or required to be authorized distributors of K. Implementation of the Final Rule 1 mechanical means.’’ record. Such a requirement would be The provisions in the final rule will 1. One comment requested confusing and inconsistent with become effective 1 year after the date of clarification on whether various plasma language in section 503(d) of the act, publication of the final rule in the products and derivatives, including which distinguishes between sample Federal Register. The agency is antihemophilic factor, Factor IX, Factor distribution and delivery by mail or providing this period to give industry IX Complex, and immune globulin IV, common carrier. However, comarketers, sufficient time to implement systems for are considered blood components or fulfillment houses, and other entities prescription drug sample distribution drugs. The comment also asked for that perform some or all of the functions and wholesale distribution that are in clarification of whether the agency associated with sample distribution and compliance with the final rule. makes a distinction between human and promotion that would otherwise be III. Comments on the Proposed Rule recombinant products in deciding performed by the drug manufacturer are whether to categorize a blood not covered by this exception. Thus, A. General Comments component preparation as a blood entities that create and maintain FDA received 56 comments on the component or drug. required forms, reports, and records; March 1994 proposal from prescription The agency advises that blood have their own sales forces and drug manufacturers, industry components, as defined in § 203.3(d) of representatives; solicit and fill requests organizations, professional associations the final rule, include red blood cells, for drug samples; or conduct other such and organizations, law enforcement plasma, fresh frozen plasma, activities are engaged in drug sample agencies, and others. Although most of cryoprecipitated AHF, and platelets. distribution and must be authorized the comments addressed only specific Antihemophilic Factor, Factor IX distributors of record. provisions of the rule, a few commented Complex, and immune globulin Health care entity. Proposed generally on the proposed rule, and products are derivatives of blood, not § 203.3(n) defined ‘‘health care entity’’ those comments were mixed. For blood components. Both blood as ‘‘any person that provides diagnostic, example, one comment stated that it components and blood derivatives are medical, surgical or dental treatment, or ‘‘supports the controls on prescription regulated as biologics under the chronic or rehabilitative care, but does drug samples sought through the authority of the Public Health Service not include any retail pharmacy or any passage of PDMA and feels that, in Act (the PHS Act) and are also drugs wholesale distributor. A person cannot general, the proposed rule is a positive under section 201(g)(1) of the act (21 simultaneously be a ‘health care entity’ step in combating the market in diverted U.S.C. 321(g)(1)). Products prescription drugs and ensuring manufactured through recombinant 1 Under the proposed rule, delivery of drug samples would constitute drug sample distribution. consumers that drug products continue technology that mimic blood derivatives Under section 503(d) of the act, only a manufacturer to remain safe and effective.’’ Another or other biological products are also or authorized distributor of record may distribute comment, however, stated that regulated as biologics under the PHS drug samples.

VerDate 29-OCT-99 09:33 Dec 02, 1999 Jkt 190000 PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 E:\FR\FM\A03DE0.001 pfrm02 PsN: 03DER1 67726 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations and a retail pharmacy or wholesale if licensed as a wholesaler. One blood banks and blood centers, are distributor.’’ comment suggested expanding the packaged and stored similarly to other 2. Several comments noted that, definition of ‘‘blood’’ or ‘‘blood pharmaceuticals, and have relatively under the proposed definition of health components’’ to include plasma normal shelf lives. Moreover, blood care entity, full-service blood centers derivatives. derivatives need not be matched from a that currently function both as health The agency declines to revise the donor to a donee as do whole blood and care entities and distributors of blood definition of health care entity or blood components intended for plasma derivatives would not be otherwise revise the proposed rule to transfusion. Thus, although in some permitted to continue to operate in both permit health care entities to engage in instances blood derivatives are of these capacities. The comments the wholesale distribution of blood distributed by blood centers and expressed concern that the ability of derivatives or other prescription drug hospital blood banks, they also are community health care entities to obtain products. The statutory restrictions in distributed by conventional drug plasma derivatives would be section 503(c)(3)(A) of the act prohibit wholesalers. There is no evidence before detrimentally affected if community the sale, purchase, or trade of, or offer the agency at this time that a substantial blood centers were prohibited from to sell, purchase, or trade prescription percentage of the nation’s supply of distributing them. drugs that are purchased by a public or blood derivatives is currently One comment explained that plasma private hospital or health care entity or distributed by blood centers, hospital derivatives are unique prescription donated or supplied at a reduced price blood banks, or transfusion services, or drugs that are largely distributed outside to a charitable organization. Because that the nation’s supply of blood the typical drug distribution network. blood derivatives are prescription drugs derivatives would be seriously impeded The comment stated that, historically, that are neither blood nor blood if these entities were prohibited from blood centers and hospital blood banks components, a hospital or health care distributing these products. have provided plasma processing and entity that purchases these products Moreover, the comments’ assertion distribution services for their local from a manufacturer or distributor, or a that blood derivatives, like blood and communities. Although the processing charitable institution that receives these blood components, are not subject to the has become more complex and is now products through a donation or at a abuses Congress set out to remedy in done largely by for-profit manufacturers, reduced price, may not sell or trade PDMA is speculative and unsupported blood centers, hospital blood banks, and these products except as permitted by facts. As discussed previously, blood transfusion services still act as final under section 503(c)(3)(B) of the act and derivatives are distributed through a distributors of plasma derivatives. The § 203.22 of the agency’s regulations.2 normal wholesale distribution system, comment said that this arrangement The agency is unpersuaded by the and they need not be matched to enables the health care providers who comments that blood derivatives specific patients. Thus, the possibility of receive blood derivatives to use the should, as a matter of public health diversion of these products exists, and ‘‘expert consultative services’’ of these policy, be grouped with blood and documented instances of diversion of entities. blood components intended for these products have in fact occurred. Several comments stated that the transfusion as products that Congress The fact that blood derivatives were not same reasons for excluding blood and did not intend to cover under PDMA specifically mentioned by Congress in blood components intended for generally, or under section 503(c)(3)(A) the legislative history is in itself of little transfusion from PDMA’s sales of the act specifically. In the September significance. restrictions are applicable to blood 1990 proposal, the agency stated that if FDA recognizes that, in addition to derivatives. The comments contended PDMA and, in particular, PDMA’s selling blood derivatives to community that there is no indication in the restrictions on the resale of prescription hospitals, blood centers have legislative history that the types of drugs were considered applicable to traditionally provided advice and abuses that lead to the restrictions in blood and blood components intended guidance on how to use the derivatives. section 503(c)(3) of the act are present for transfusion, the result would be to The final rule does not prohibit the with blood derivatives or that Congress seriously impede the present blood provision of information by a health intended the restrictions in section distribution system and thereby care entity to another health care entity, 503(c)(3) of the act to apply to blood substantially interfere with, and reduce, but rather prohibits the selling of derivatives. the nation’s blood supply. Based largely prescription drug products, including The comments suggested ways in on this ‘‘untenable result,’’ the agency blood derivatives, that are purchased by which the proposed rule could be stated its belief that Congress did not a hospital or health care entity. Thus, amended to allow blood centers to intend to subject blood and blood blood centers or other entities that have continue to function as wholesale components to PDMA’s provisions (55 traditionally provided information to distributors of plasma derivatives. Two FR 38027). hospitals or other health care centers are comments suggested specifically The comments contend that, as with not precluded from doing so under excluding blood banks, transfusion whole blood and blood components PDMA or the final rule. services, and hospital blood banks from intended for transfusion, the supply of 3. One comment stated that FDA’s the prohibition against a health care blood derivatives to the public would be definition of health care entity is entity simultaneously being a wholesale impeded if blood banks were not ‘‘without factual or legal foundation.’’ distributor. Another comment permitted to distribute these products. Two comments stated that FDA’s recommended that FDA eliminate However, unlike whole blood and blood interpretation of section 503(c)(3) of the entirely the prohibition against a health components, blood derivatives are act as prohibiting a health care entity care entity simultaneously being a manufactured in large quantities by from simultaneously being a wholesale wholesale distributor with a manufacturers that are independent of distributor is contrary to the plain clarification in the preamble to the final language of the statute and to legislative rule that health care entities engaging in 2 For example, the proposed definition of health intent, and places inappropriate ‘‘sham’’ operations to avoid resale care entity would not prevent a hospital, health care restrictions on the legitimate operations entity, or charity from purchasing blood derivatives prohibitions remain subject to and administering them to patients under a valid of blood centers. These comments enforcement of resale prohibitions, even prescription. interpreted the last sentence in section

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503(c)(3)(A) of the act, which states in concerns also were expressed by such nonphysician practitioners would part that ‘‘[f]or purposes of this Congress in the legislative history. (See be permitted to obtain samples. paragraph, the term ‘entity’ does not H. Rept. 100–76, pp. 12–13.) If health In developing the proposed definition include a wholesale distributor of drugs care entities were permitted to obtain of licensed practitioner, the agency was or a retail pharmacy licensed under State wholesale distributor licenses and not aware that some States may permit State law,’’ as creating an exemption to engage in wholesale distribution of practitioners to prescribe certain drugs, the sales restrictions in that section for prescription drugs, as suggested by the but prohibit them from obtaining health care entities that are State comments, there would be no way of samples of those drugs. Because the licensed as wholesale distributors. The ensuring that the types of abuses that agency does not wish to interfere with comments stated that FDA’s proposed Congress sought to prevent in section States’ authority to determine who may definition of ‘‘health care entity’’ 503(c)(3)(A) of the act would not occur. request and receive drug samples, the contradicts the clear wording of the Neither the requirements applicable to agency clarifies that a practitioner who statute. The comments also stated that wholesale distributors in section 503(e) is prohibited by State law from the proposed definition is inconsistent of the act nor the State licensing receiving samples of certain types of with legislative intent to permit health guidelines in part 205 contain drugs is not permitted to do so under care entities acting as legitimate requirements to deter a health care PDMA even though he or she is licensed wholesalers to engage in wholesale entity from reselling prescription drugs, or authorized to prescribe those drugs. distribution of prescription drugs. or require or authorize FDA to keep Ongoing relationship. Proposed The agency acknowledges that the track of the circumstances under which § 203.3(r) defined ‘‘ongoing first clause of the last sentence in prescription drugs are bought and sold relationship’’ as an association that section 503(c)(3) of the act could be read by wholesale distributors. Thus, if exists when a manufacturer and a to make the restrictions in section health care entities were permitted to be distributor enter into a written 503(c)(3)(A) of the act inapplicable to State licensed wholesale distributors, agreement under which the distributor hospitals or health care entities State they could purchase drugs for their own is authorized to sell the manufacturer’s licensed as wholesale distributors. use and sell them on the secondary products for a period of time or for a However, the agency believes that the wholesale market with impunity and number of shipments, at least one sale statutory language should be read to without the knowledge of the agency or is made under that agreement, and the mean that health care entities subject to Congress. The agency does not believe name of the authorized distributor of the restrictions in section 503(c)(3)(A) of that Congress intended such a result. record is entered on the manufacturer’s the act cannot simultaneously be Licensed practitioner. Proposed list of authorized distributors of record. wholesale distributors or retail § 203.3(o) defined ‘‘licensed 6. One comment objected to a pharmacies. As noted by the agency in practitioner’’ as ‘‘any person licensed by requirement for a written agreement the proposed rule (59 FR 11842 at State law to prescribe drugs.’’ between a manufacturer and a 11845), the former interpretation is 4. One comment recommended that distributor. The comment stated that inconsistent both with general rules of ‘‘or authorized’’ be added after written agreements are not customary in statutory construction and with ‘‘licensed’’ in the definition to allow the industry and that such a legislative intent. If this interpretation nonphysician practitioners subject to requirement would be burdensome were to be given effect, it would mean State authorization schemes other than because distributors distribute for large that a health care entity could licensing to obtain drug samples. numbers of vendors. The comment circumvent the sales restrictions by The agency has decided to follow the recommended that, for the purposes of obtaining a State wholesale distribution suggestion of the comment and revise proving that an ongoing relationship license. Such an interpretation would the definition of ‘‘licensed practitioner’’ exists, it should be sufficient to show deprive the sales restrictions of any in the final rule to include practitioners that sales are made on a continuing force or effect. Moreover, Congress authorized by State law to prescribe basis and that the distributor’s name expressly enumerated in section drugs. Congress stated in the legislative appears on the manufacturer’s list of 503(c)(3)(B) of the act the circumstances history (S. Rept. 100–303, p. 5) that authorized distributors. under which drugs purchased by a ‘‘Drug samples may only be distributed Another comment objected both to the health care entity may be sold. The to practitioners licensed or authorized requirement for a written agreement and agency believes that if Congress had by State law to prescribe such drugs.’’ to the requirement that a distributor be intended to permit sales of prescription Moreover, the use by Congress of the on the manufacturer’s list of authorized drugs purchased by health care entities term ‘‘licensed practitioner’’ rather than distributors of record. The comment that are State licensed wholesale ‘‘physician’’ in section 503(d)(2)(A) of stated that neither of these requirements distributors, it would have done so the act shows congressional intent to was previously required by the agency under section 503(c)(3)(B) of the act. allow nonphysician practitioners to in compliance information provided to Interpreting section 503(c)(3) of the obtain drug samples. Because a industry by the agency. The comment act in the manner suggested by the significant number of these practitioners stated that both requirements would comments would also be inconsistent are subject to different State make it more difficult for distributors to with legislative intent as reflected in the authorization schemes than licensing, become authorized distributors of congressional findings and legislative the agency finds that a strict record. In addition, the comment stated history. The statutory restrictions in interpretation of the word ‘‘license’’ that the requirements would give section 503(c)(3)(A) of the act reflect the would be inconsistent with prescription drug manufacturers the congressional finding in section 2(7) of congressional intent. ability to deny authorized-distributor-of- PDMA that the resale of prescription 5. One comment stated that, in some record status to distributors with whom drugs by health care entities at below States, advanced practical nurses are they have engaged in ongoing business wholesale prices had helped to fuel the licensed to prescribe certain drugs, but relationships. The comment stated that diversion market and constituted an are prohibited from obtaining samples by giving drug manufacturers the power unfair form of competition to legitimate of the same drugs. The comment to decide to whom PDMA wholesale wholesalers and retailers paying asserted that, under the proposed distribution requirements apply without prevailing market prices. These same definition of ‘‘licensed practitioner,’’ oversight or review, FDA would be

VerDate 29-OCT-99 09:33 Dec 02, 1999 Jkt 190000 PO 00000 Frm 00035 Fmt 4700 Sfmt 4700 E:\FR\FM\A03DE0.001 pfrm02 PsN: 03DER1 67728 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations delegating legislative power to the which the authorization extends.3 This necessary to be considered authorized private sector in violation of separation latter requirement, although not distributors of record. The comment of powers principles in the U.S. included in the proposed rule, is recommended that the proposed Constitution. The comment consistent with the requirement in definition of ongoing relationship be recommended that FDA adopt a proposed § 203.50(c)(1) for revised to permit these entities to be definition of ongoing relationship that manufacturers to maintain a list of authorized distributors of record. mirrors a definition set forth by the authorized distributors that specifies The comment raises a valid point. The agency in a 1988 compliance letter. whether distributors are authorized to proposed definition of ongoing PDMA defines the term ‘‘authorized distribute the manufacturer’s full relationship is inappropriate for sample distributors of record’’ as those product line or only particular products. distribution, and has been revised in the distributors with whom a manufacturer Given the relative ease with which the final rule to specify that an ongoing has established an ongoing relationship agreement required by § 20.3(u) can be relationship exists when there is a to distribute the manufacturer’s created, the agency believes that it is written agreement between a products. PDMA does not, however, highly unlikely that a manufacturer manufacturer and distributor to define what constitutes an ‘‘ongoing would refuse to enter into a written distribute, rather than to sell, the relationship.’’ In a 1988 letter issued by agreement with a distributor with whom manufacturer’s products for a period of FDA (see Letter from Daniel L. Michels, it wishes to have a continuing business time or for a number of shipments. Director, Office of Compliance to relationship. Moreover, it is clearly not Prescription drug. Proposed § 203.3(v) Regulated Industry, Docket No. 88N– the agency’s intent in requiring a defined ‘‘prescription drug’’ as any drug 258L, August 1, 1988), the agency made written agreement to confer additional required by Federal law to be dispensed its first attempt to interpret the term in discretion on manufacturers, but rather only by a prescription, including the context of PDMA. FDA stated that to implement the requirement in the act finished dosage forms, bulk drug ‘‘ongoing relationship’’ may be for an ongoing relationship in a manner substances, and active ingredients interpreted to mean a continuing in which it can be efficiently enforced. subject to section 503(b) of the act. business relationship in which it is This is consistent with the agency’s On its own initiative, the agency has intended that the wholesale distributor authority under section 701(a) of the act removed ‘‘active ingredients’’ in the engage in wholesale distribution of a (21 U.S.C. 371(a)) to issue regulations final rule. The term ‘‘bulk drug manufacturer’s prescription drug for the efficient enforcement of the act. substance,’’ as defined under § 203.3(e), product or products. The agency stated Accordingly, the agency declines to is synonymous with ‘‘active ingredient.’’ that evidence of such intent could revise the definition of ‘‘ongoing Wholesale distribution. Proposed include, but would not be limited to, the relationship’’ to eliminate the § 203.3(y) defined ‘‘wholesale existence of a written franchise, license, requirement for a written agreement. distribution’’ as ‘‘distribution of or other distribution agreement between Finally, on its own initiative, the prescription drugs to persons other than the manufacturer and wholesale agency has revised the proposed a consumer or patient, but does not distributor and the existence of ongoing definition of ‘‘ongoing relationship’’ in include: (1) Intracompany sales * * *.’’ sales by the manufacturer to the the final rule to eliminate the 8. One comment objected to the distributor. requirement that at least one sale be exemption of intracompany sales from The agency continues to believe that completed under the written agreement wholesale distribution, stating that it the term ‘‘ongoing relationship’’ in the and that a distributor be entered on the ‘‘totally gets away from the original context of wholesale distribution infers manufacturer’s list of authorized intent of the PDMA.’’ The comment said a continuing business relationship distributors of record. The proposed that this provision leaves a gap where between a distributor and a requirement for a completed sale under diversion can occur between manufacturer where the intent exists to the written agreement is unnecessary wholesalers and retail outlets owned by engage in wholesale distribution. and, as discussed below, inconsistent them. Furthermore, the agency has determined with the use of the definition in the The agency disagrees with the that, to facilitate compliance with and context of sample distribution. The comment. Intracompany sales were enforcement of the act, it is necessary to proposed requirement that a distributor expressly excluded by Congress from have a formalized way of establishing be entered on the manufacturer’s list of the definition of wholesale distribution that an ongoing relationship exists. A authorized distributors of record is in section 503(e)(4)(B) of the act. In written agreement in which the unnecessary in light of the requirement, addition, both the House and Senate manufacturer authorizes the distributor in section 503(e)(1)(B) of the act and reports referred to the exclusion. (See H. to distribute some or all of its products revised § 203.50(d) of the final rule, that Rept. 100–76, S. Rept. 100–303.) The for a period of time or for a number of manufacturers keep an updated list of House report stated: shipments will provide a clear and authorized distributors of record at their [i]t is the express intent of the Committee verifiable expression of the parties’ corporate offices. that the scope of [this section] include intent to engage in a continuing 7. Another comment stated that distribution by chain drug warehouses, business relationship. The written sample fulfillment houses, mailing wholesale drug warehouses, and all sellers of agreement required by proposed services, comarketers, and similar prescription drugs in wholesale quantities to entities clearly distribute samples persons or firms other than the consumer or § 203.3(r) (revised as § 203.3(u)) need patient. With respect to section 503(e)(1), not rise to the level of a contract or within the meaning of ‘‘distribute’’ in intracompany sales, i.e., the distribution create legally enforceable obligations on proposed § 203.3(h), but cannot satisfy between divisions and companies having the the parties. Rather, the agreement need the requirements for an ongoing same ownership, are excluded. only state that the distributor is relationship in proposed § 203.3(r) (H. Rept. 100–76, p. 17.) authorized to distribute a Thus, as expressed in the language of manufacturer’s products for a period of 3 The written agreement required under § 203.3(u) the act and the legislative history, time or for a number of shipments and, to establish an ongoing relationship constitutes a Congress’ intent was to exclude ‘‘required record’’ under revised § 203.60, and must if the distributor is not authorized to be made available, upon request, to FDA or other intracompany sales from the distribute all of the manufacturer’s Federal, State, or local regulatory or law requirements for wholesale distribution products, identify those products to enforcement officials for review and reproduction. in section 503(e) of the act. In addition,

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A health care organization resale of drugs obtained by hospitals contemplates a licensing scheme for requested that FDA clarify whether, and health care entities, and the business entities with subsidiaries, under this section, its nonprofit potential profit accruing to those affiliates, and more than one facility (see affiliates may provide prescription entities from such sales, with which § 205.5(b)), and provides that State drugs obtained at a nominal cost to Congress was concerned in enacting the licensing authorities require each patients under a prescription, where the sales restrictions. wholesale distributor to supply amount charged for the drug varies Finally, the agency disagrees that the information on all facilities used by the depending on the patient’s ability to exclusion is not supported by the licensee for the storage, handling, and pay. legislative record. As discussed distribution of prescription drugs (see Section 203.20 does not prohibit a previously and in the proposed rule (59 § 205.5(a)(3)). health care entity from obtaining FR 11842 at 11846 and 11847), the prescription drugs at reduced cost. prohibition against sales by hospitals or C. Reimportation Rather, it prohibits reselling those drugs health care entities was prompted in Proposed § 203.10 stated, in relevant except in specified ways. Section part because of the temptation for such part, that ‘‘[n]o prescription drug that 203.22(e) allows the resale of drugs by entities to sell for profit drugs acquired was manufactured in a State and a health care entity under a valid at below wholesale prices. Because no exported from the United States may be prescription. The amount of profit financial incentive exists for reimported by anyone other than its derived from such a sale, or the lack government hospitals to profit from manufacturer.’’ thereof, is not addressed by § 203.22(e). sales to other government hospitals, it is 9. One comment requested that the Therefore, a health care entity may, unlikely that such sales would result in proposed rule be revised to state that a subject to other applicable laws, resell the kinds of abuses that PDMA sales prescription drug may be reimported by prescription drugs to patients under a restrictions were designed to prevent. any of a manufacturer’s subsidiary valid prescription at varying prices. In addition, Congress expressly companies or contract manufacturers. 2. Section 203.22(f) created exclusions permitting, among For the reasons discussed in the Proposed § 203.22(f) provided that other things, sales between hospitals or preamble to the proposed rule (59 FR § 203.20 does not apply to: health care entities under common control and emergency sales by 11842 at 11844), FDA is adopting the The sale, purchase, or trade of a drug or the hospitals or health care entities to retail definition of manufacturer set forth in offer to sell, purchase, or trade a drug by pharmacies to allow for the provision of § 201.1 (21 CFR 201.1) of the agency’s hospitals or health care entities owned or operated by Federal, State, or local health care to patients. (See H. Rept. regulations for the purposes of part 203. governmental units to other hospitals or 100–76, 13). As discussed in the Accordingly, a manufacturer’s health care entities owned or operated by preamble to the proposal (58 FR 11842 subsidiary companies or contract Federal, State, or local governmental units. at 11846 and 11847), permitting manufacturers may reimport a 12. One comment opposed this prescription drug sales between prescription drug product only if they exclusion. The comment argued that government hospitals and health care also qualify as a manufacturer of the government employees are just as apt to entities will help such entities to drug product under § 201.1. engage in drug diversion activities as are provide health care services in response 10. One comment recommended that private sector employees. The comment to various needs, including the language be added to the section to stated that the potential for drug provision of health care to people with include drugs that are sold by a diversion is even greater in the public low incomes and the distribution of manufacturer for exportation, but never sector because Federal and State vaccines. Thus, the exception is leave the United States. The comment hospitals and health care entities often consistent both with Congress’ general stated that a large proportion of the receive more favorable pricing terms objectives in enacting the sales ‘‘export’’ drugs that are diverted never than private hospitals. The comment restrictions and with the rationale actually leave the United States. also stated that the exclusion ‘‘appears supporting other exemptions expressly Because the drugs referred to by the self serving’’ and is not supported by the created by Congress. comment are not exported, they cannot legislative record. 3. Sections 203.23 and 203.24 be subject to the restriction on FDA disagrees with this comment. As Proposed §§ 203.23 and 203.24 set reimportation. However, the domestic the agency explained in the preamble to forth exemptions to the sales distribution of such drugs is covered by the proposed rule (59 FR 11842 at prohibition contained in proposed PDMA and other applicable laws, which 11847), any profits from legitimate sales § 203.20. Proposed § 203.23 provided an should help to reduce the potential for of prescription drugs by government exemption for the revocation of a sale diversion. hospitals would accrue to government and purchase transaction by a hospital, health care entity, or charitable D. Sales Restrictions treasuries. Thus, no financial incentive exists for a government hospital or institution because of a mistake in Proposed § 203.20 prohibited the sale, health care entity, or its representatives ordering or delivery and the reshipment purchase, or trade of, or offer to sell, acting in an official capacity, to engage of the prescription drug to a purchase, or trade, any prescription in diversion. Given the lack of financial manufacturer or wholesale distributor drug that was purchased by a public or incentive, the amount of profit that for a credit or refund. The section private hospital or health care entity or could be realized due to the prices at required that the drug be shipped back donated or supplied at a reduced price which government hospitals may to the manufacturer or distributor to a charitable institution. receive prescription drugs is irrelevant. within 10 days and that the reshipment 1. Section 203.22(e) Moreover, although it is possible that be made under proper conditions for Proposed § 203.22(e) provided that individual employees may steal drugs or storage, handling, and shipping. In § 203.20 does not apply to: ‘‘The sale, obtain them by other criminal methods addition, the section required that, if the purchase, or trade of a drug, an offer to and sell them, criminal conduct by drug is reshipped to a wholesale sell, purchase, or trade a drug, or the individual employees was not intended distributor, the hospital, health care dispensing of a drug under a valid by Congress to be addressed by the sales entity, or charitable institution must prescription.’’ restrictions. Rather, it was the legal provide written notice to the

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The comment prescription drug purchased by a On its own initiative, the agency has said that the provision of notice to a hospital or health care entity, or decided not to include in revised manufacturer when drugs are returned acquired at a reduced price by or § 203.23 the requirement in proposed to a wholesale distributor would donated to a charitable institution, to § 203.24(a) that a hospital, health care constitute an unreasonable the manufacturer or the wholesale entity, charitable institution, or administrative burden on manufacturers distributor that sold, donated, or distributor notify the manufacturer that who do not provide a refund or credit supplied the prescription drug. The a prescription drug product has been in such circumstances. section required that, if the drug is returned when the return is made to a As discussed in the proposal (59 FR returned to a wholesale distributor, the wholesale distributor. Under revised § 11842 at 11847), proposed §§ 203.23 hospital, health care entity, charitable 203.23(a) and (b), the hospital, health and 203.24 were included to address the institution, or distributor must notify care entity, or charitable institution is concern that, subsequent to a completed the manufacturer that the drug has been already required to fill out a credit sale, a return for cash, credit, or other returned. In addition, the hospital, memo documenting the return of a consideration could be viewed as a new health care entity, or charitable prescription drug and to forward a copy and prohibited sales transaction under institution must prepare a credit memo of that memo to the manufacturer. The section 503(c)(3)(A) of the act. Although for all returns. The returning entity must agency believes that the receipt of the the agency agrees that Congress did not forward a copy of the memo to the credit memo by the manufacturer intend to prohibit legitimate returns of manufacturer and retain a copy for its should provide sufficient notice to it of prescription drugs, there is a potential records. The section also required that the source of a return, and the for abuses to occur with returns. The returned drugs be kept under proper additional notice that would have been notice and documentation requirements conditions for storage, handling, and required under proposed § 203.24(a) is in revised § 203.23(a) and (b) are shipping. Finally, the section required not necessary. necessary to help ensure that the that the value of any credit, refund, or 14. One comment stated that the returning entity or entities do not profit exchange not exceed the purchase price concerns addressed by the requirements unfairly by the return and that diversion or, if a donation, the fair market price for notification of the manufacturer and of returned drugs does not occur. Both of the returned product. documentation of returns in the of these goals are consistent with 13. One comment said that it proposal is legitimate, but that health Congress’ intent in enacting the sales generally supported the agency’s care entities should not be ‘‘held restrictions. (See sec. 2(7), PDMA, H. approach for allowing returns, but responsible for helping to police the Rept. 100–76, pp. 12–13.) questioned the need for § 203.23 and wholesale drug industry.’’ The comment 16. One comment stated that recommended that it be deleted in the said that wholesalers should be required proposed §§ 203.23 and 203.24 should final rule. According to the comment, to develop mechanisms for be clarified so that prescription drugs the agency’s purpose for calling a return documentation and recordkeeping that that are returned to the manufacturer for a revocation of acceptance and would achieve the desired goals of the destruction are exempt from the reshipment was to address concerns that regulation. restrictions in § 203.20, and thus need sales provisions in the Uniform The agency believes that the comment not adhere to the requirements in Commercial Code (UCC) could make a misconstrues the purpose of the notice proposed §§ 203.23 and 203.24. return a prohibited resale under PDMA. and documentation requirements. As The agency declines to provide the The comment stated that by ‘‘expanding the agency explained in the proposal, clarification sought by the comment. on this initial allowance of returned the purpose of requiring that a credit Under § 203.20, the sale, purchase, or product and proposing § 203.24, FDA memo be forwarded to the manufacturer trade of a prescription drug purchased has shown that it has overcome UCC is to help ensure that any chargebacks by a hospital or health care entity, or concerns and will not view a return as or reduced prices will be factored into donated or supplied at a reduced price a prohibited resale.’’ a credit or refund provided by the to a charitable institution, is prohibited The agency agrees for the most part manufacturer to prevent windfall profits unless the sale, purchase, or trade is with the comment. Because proposed from the transaction (59 FR 11842 at exempt from § 203.20 under § 203.22 or §§ 203.23 and 203.24 permit 11847). There is a potential for such revised § 203.23. When a prescription transactions and impose notification profits to be realized not only by drug that is purchased by a hospital, and documentation requirements that wholesale distributors, but by hospitals, health care entity, or charity is returned are similar, and because the situations health care entities, and charities. Thus, to the manufacturer for destruction and in which returns would be permitted the agency disagrees that the purpose of a credit or refund is given for the return, under § 203.23 would also be permitted providing notice is limited to policing the return constitutes a sale that is by § 203.24, the agency has decided to the wholesale drug industry. In prohibited by § 203.20, unless the withdraw proposed § 203.23 and addition, the agency believes that the requirements of § 203.23 are met. redesignate proposed § 203.24 as new returning hospital, health care entity, or Similarly, the agency will consider the § 203.23 in the final rule. This will charity is in the best position to provide provision of destruction services by a simplify the regulation and eliminate the information required in the credit manufacturer or distributor at no or potential confusion about whether memo and, as the party that derives the reduced cost to the returning entity, proposed § 203.23 or § 203.24 applies to benefit from any special pricing relative to the fair market value for such a particular return. Under the revised provided by the manufacturer, should services, to constitute consideration regulation, all prescription drugs be responsible for ensuring that returns supporting a sale. Thus, returns of returned by a hospital, health care are legitimate. prescription drugs for destruction must entity, or charitable institution to its 15. Another comment stated that the meet the requirements of § 203.23, supplier will be regarded as ‘‘returns’’ resale restrictions were not intended by unless no credit or refund is given for and will be subject to the same Congress to cover normal and legitimate the return and the returning entity pays

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First, The agency clarifies that, regardless of manufacturers, the agency has revised drugs that are returned for destruction whether a common carrier is used to § 203.23 in the final rule to eliminate have the same potential to be diverted reship the drug, the returning hospital, the requirement that the value of any as drugs that are returned for health care entity, or charitable credit or refund not exceed the purchase redistribution. The threat to the public institution is responsible for complying price or fair market price of the returned health from diversion of such drugs with the requirements of § 203.23. Thus, product. could be particularly severe because if proper conditions were not they are presumably unsuitable for use. maintained during reshipment and/or if E. Samples Therefore, it is essential that drugs written documentation showing that 1. Sample Distribution by Mail or returned for destruction be subject to proper conditions were maintained Common Carrier documentation requirements that during reshipment was not provided to Proposed § 203.30(a)(2) required that provide accountability over the return. the manufacturer or wholesale the recipient of a drug sample Additionally, there may be situations in distributor to which the drugs are distributed by mail or common carrier which a returned drug that is designated returned, the requirements of § 203.23 execute ‘‘a written receipt, as set forth for destruction by a hospital, health care would not be met and the returning entity, or charity may be deemed hospital, health care entity, or charitable in paragraph (c) of this section, when suitable for sale by the distributor or institution would be in violation of the drug sample is delivered.’’ Proposed manufacturer. For example, a drug § 203.20 of FDA regulations and section § 203.30(c) set forth the required returned because its outer packaging 503(c)(3)(A) of the act. contents of the receipt for samples was damaged may, after examination or 18. Proposed § 203.24(d) required that distributed to licensed practitioners, testing is conducted by the the value of any credit or refund not and to designated pharmacies of health manufacturer as required by § 205.50(e), exceed the purchase price or fair market care entities. Proposed § 203.30(c) prove to be fit for use. Thus, returned price of the returned product. One provided: comment stated that the provision * * * The receipt is to be on a form drugs must be maintained under proper designated by the manufacturer or conditions for storage, handling, and would be burdensome on manufacturers distributor, and is required to contain the shipping, and written documentation that currently calculate credits or following: reflecting the maintenance of proper refunds based on the purchase price of (1) If the drug sample is delivered to the conditions must be provided to help the drug as of the date of return. The licensed practitioner who requested it, the ensure that, if the returned drug is comment also stated that it would be receipt is required to contain the name, redistributed, it is safe and effective. virtually impossible, without the address, professional title, and signature of 17. One comment supported the implementation of a costly, the practitioner or the practitioner’s designee requirements in proposed §§ 203.23(b) sophisticated system by the who acknowledges delivery of the drug and 203.24(e) (new § 203.23(c)) relating manufacturer, to attach a cost to a sample; the proprietary or established name to maintaining proper conditions for specific item when it is not known and strength of the drug sample, the quantity, and the lot or control number of the drug storage, handling, and shipping of when the item was acquired. The sample delivered; and the date of the returned drugs and providing comment recommended that the delivery. documentation of such conditions. The provision be revised to allow the value (2) If the drug sample is delivered to the comment said that wholesalers need the of the return to be based on the pharmacy of a hospital or other health care information to carry out their purchase price of the drug as of the date entity at the request of a licensed obligations for handling returns under of the return. practitioner, the receipt is required to contain § 205.50(e). The comment recommended The agency’s intent in proposing the name and address of the requesting that documentation of proper return § 203.24(d) was, as with the notice licensed practitioner, the name and address conditions should be specifically provisions, to prevent hospitals, health of the hospital or health care entity pharmacy nondelegable. care entities, charities, or distributors designated to receive the drug sample; the Section 203.23(c) requires that a drug from obtaining windfall profits from name, address, professional title, and signature of the person acknowledging returned to a manufacturer be stored returns at the expense of manufacturers. delivery of the drug sample; the proprietary and handled appropriately, according to Thus, as proposed, the provision would or established name and strength of the drug its labeled storage requirements, both not make manufacturers responsible for sample, the quantity, and the lot or control while it is in the possession of a ensuring that the amount of a credit, number of the drug sample delivered; and the hospital, health care entity, or charity, refund, or exchange given for a drug date of the delivery. and during its return (i.e., during does not exceed the purchase price or, 19. Several comments stated that not reshipment). Prior to reshipment, only if a donation, the fair market value at all of the information required to appear the hospital, health care entity, or the time the donation was made. on the sample receipt form under charity in physical possession of the Instead, the section would make the proposed § 203.30(c) is necessary to drug knows and can document whether returning hospital, health care entity, or confirm delivery of a sample. One the drug has been stored and handled charitable institution responsible for comment stated that the act only appropriately. However, because a ensuring that it did not accept a credit, requires information sufficient to verify common carrier or other third party may refund, or exchange that exceeds the that the sample received matches the be used to reship the drug, this party purchase price or fair market value at sample requested and sent. Another may provide documentation that the the time the drug was purchased or comment asserted that FDA does not drug was stored and handled properly donated. Nevertheless, FDA recognizes have the authority under PDMA to during reshipment. Thus, if a returning that in order to comply with this specify the content of the receipt, and hospital, health care entity, or charity provision, manufacturers would have to that the only information required by uses a common carrier or other third maintain records of the price paid for a PDMA is the signature of the licensed party to reship drugs, the third party or drug at the time it was purchased. practitioner and any information

VerDate 29-OCT-99 09:33 Dec 02, 1999 Jkt 190000 PO 00000 Frm 00039 Fmt 4700 Sfmt 4700 E:\FR\FM\A03DE0.001 pfrm02 PsN: 03DER1 67732 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations necessary to determine the identity of three followup letters to achieve manufacturers and authorized the sample and the recipients. compliance within the 90 to 95 percent distributors of record to create and The agency has determined that, with range. Another comment said that data maintain drug sample receipts and other the exception of the proposed may be accessed faster and easier with records using combinations of paper- requirement for the lot or control electronic verification systems than based and electronic media. Under number of the sample (discussed below with business reply mail cards, since § 203.60(a)(2), combinations of paper in conjunction with comments on the data are stored electronically rather records and electronic records may be §§ 203.30 and 203.31), the information than manually. Several comments used provided: (1) The requirements of requirements in proposed § 203.30(c) recommended revising the proposed part 11 are met for the electronic record, are necessary to ensure that samples rule to bring it into conformity with the and (2) a reasonably secure link between that are requested are received by the specific electronic delivery verification the paper record and electronic record intended recipient and that patterns of system used by the commenter. Other exists to ensure that the combined nondelivery of drug samples can be comments recommended that the records are trustworthy and reliable and identified. Both of these objectives are proposed rule be revised to state that to ensure that the signer cannot readily consistent with legislative intent. (See receipts used by common carriers as repudiate the signed record as not H. Rept. 100–76 at 15.) The agency part of their normal course of business genuine. Neither of the scenarios therefore declines to eliminate or are sufficient. presented by the comments would modify these requirements in the final The agency recognizes that ensure that a reasonably secure link rule. manufacturers and authorized exists between the paper-based and The information required under distributors of record may not be able to electronic records because the proposed § 203.30(c) mirrors most of the comply fully with the sample receipt individual signing the receipt at the information required to appear on the content requirements in proposed time of the sample delivery would not sample request form under proposed § 203.30(c) using commercial carriers’ know the contents of the receipt and § 203.30(b). This information is the electronic delivery acknowledgment thus could not attest that the contents of minimum information necessary to systems. Electronic delivery the receipt are correct. Moreover, under identify the type and quantity of drug acknowledgment systems do not appear these circumstances, the signer could samples being requested and to be designed to meet the specific readily repudiate the signed record as distributed, the requesting practitioner, informational requirements for sample not genuine. Thus, neither of the and, if applicable, the designated receipts under § 203.30(c) at the present scenarios would meet the requirements hospital or health care entity to which time. Thus, the use of business reply of § 203.60(a)(2). the drug samples are to be delivered. mail cards or other types of paper 22. One comment requested The only information required by systems capable of recording the clarification of whether the proposed proposed § 203.30 to appear on drug required information may be necessary. rule would supplant the March 2, 1993, sample receipt forms that is not required These systems may not be as convenient guidance letter recommendations on to appear on request forms is the name, for health care practitioners receiving delivery confirmation of drug samples address, professional title, and signature samples to use as electronic delivery by common carriers. of the person acknowledging delivery of acknowledgment systems and will Any policy stated in that document, the drug sample. This information is probably be more expensive for including the policy on delivery necessary to establish accountability for manufacturers and authorized verification, is superseded by the receipt of drug samples when samples distributors of record. However, these policies set forth in the final regulation. are delivered to a practitioner’s office disadvantages are not in themselves 2. Sample Distribution by a and the requesting practitioner does not sufficient reason to eliminate the Representative or Detailer physically receive the drug sample and informational requirements in proposed sign the sample receipt or when samples § 203.30(c), where no satisfactory a. Section 203.31(a)(1) and (a)(2). are delivered to a hospital or health care alternatives exist to ensure that Proposed § 203.31(a)(1) required that entity at the request of a practitioner. congressional objectives for establishing before a manufacturer or authorized 20. Several comments objected to the controls on sample distribution are met. distributor of record distributes a drug required information because electronic 21. Two comments requested that sample to a licensed practitioner, it delivery verification systems currently FDA permit the use of combinations of must receive a signed, written request used by delivery services and common electronic and paper media to create the form from the licensed practitioner. carriers cannot accommodate the required receipt form. Under the Proposed § 203.31(a)(2) required that the information. According to the scenario presented by one of the recipient sign a receipt form containing comments, current electronic delivery comments, a receipt would be signed by the information required under verification systems are capable of the practitioner or his designee at the proposed § 203.31(c) when the drug recording some, but not all, of the time of delivery, but it would not sample is delivered. Proposed required information. The comments contain all of the required information. § 203.31(a)(3) required that the receipt stated that to capture all of the required The information not contained on the be returned to the manufacturer or information, a manufacturer or receipt would be maintained on a distributor. authorized distributor of record would separate electronic data base, which 23. One comment requested that the have to use a paper system independent would be linked via a ‘‘unique number’’ proposed rule be revised to clarify that of common carriers’ delivery to the receipt. The other comment a single form may be used to satisfy the verification, such as a business reply requested that the agency permit a requirements of a request and receipt mail card. Several comments said that signature obtained through a carrier’s form. paper systems involve more normal delivery verification to be FDA set forth its policy on the use of administrative costs and would result in ‘‘added’’ later to an electronic record one form to satisfy the request and less compliance by practitioners than containing all of the required receipt form requirements for samples electronic delivery verification. One information. delivered by a representative in the comment stated that, using business As discussed previously, the agency preamble to the proposed rule (58 FR reply mail cards, it would take two to has revised proposed § 203.60 to permit 11842 at 11849). The agency stated:

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A sample request and receipt need not be simultaneously, the potential for sample pharmacy designated to receive the drug on separate forms if delivery is by a diversion and corresponding need for a sample. representative. A single form could be sample receipt are as great as when 26. One comment objected to the devised and used containing all of the samples are delivered by mail or requirement that the name and address required information, which could be fully completed and executed with a single common carrier. When the request for of the hospital or health care entity signature, if the request and delivery are and delivery of a sample do occur pharmacy designated to receive the drug simultaneous, or executed in part with a simultaneously, the sample request and sample appear on the receipt. The signature for the request at the time of the receipt form may be merged into one comment stated that this information is request, and executed in part with a second form with a single signature (see known by the requesting licensed signature acknowledging receipt at the time discussion above). practitioner. of the delivery. 25. FDA received four comments The purpose of the receipt The agency wishes to emphasize that, related to the medium on which the requirement is not to provide whether one form or separate forms are required information for representative- information to the licensed practitioner used, only a licensed practitioner may delivered sample receipts may appear. that requests the drug sample, but to request a sample and sign the request Two comments assumed that proposed provide manufacturers and authorized form. A sample receipt, however, may § 203.31(a)(2) and (c) required receipts distributors with documentation that be signed either by a licensed to be in paper form and objected to that samples that were requested were in fact practitioner or that practitioner’s requirement. Two comments asked for properly delivered. When a licensed designee. clarification on whether receipts do, in 24. FDA received four comments that practitioner requests that a drug sample fact, have to be in paper form or may be be delivered to a hospital or health care objected to any requirement for a receipt electronically created. All four for representative-delivered samples. entity pharmacy, it is necessary for the comments assumed that the proposed name of the hospital or health care The comments stated that receipts for regulations required that a paper receipt representative-delivered samples were entity pharmacy to appear on the be left with the licensed practitioner sample receipt so that the person not required by PDMA and that this even when receipts are electronically requirement goes beyond the scope of receiving the sample at the pharmacy created, and objected to this can verify, through his or her signature the act. Two comments stated that most requirement. One comment stated that requests and deliveries take place on the on the sample receipt, that the sample neither PDMA guidelines nor the was delivered as requested. same representative visit. One comment proposed regulations require licensed recommended that the rule be revised to c. Section 203.31(d)(1) and (d)(2). practitioners to keep records of drug Proposed § 203.31(d) required that drug cover only those situations where samples received, thus a written receipt request and delivery of samples do not manufacturers and authorized would serve no purpose. distributors of record conduct an occur on the same visit. Another It appears that the confusion over comment said that Congress required inventory, using generally accepted whether receipts must be written on inventory practices, of drug samples in receipts for samples delivered by mail paper came from the preamble or common carrier, but not the possession or control of each of their discussion of proposed § 203.31 (59 FR representatives. The inventory must be representatives because there are more 11842 at 11849). FDA stated that ‘‘the opportunities for samples to be lost or conducted at least annually, and the agency has tentatively concluded that results of the inventory are required to diverted when the mail is used. The the requirement for a written receipt comment recommended that the be recorded in an inventory record and should extend to all drug sample reconciliation report. The contents of manufacturer could use the information deliveries, and that requirement is the inventory record and reconciliation on the request form to do its own included in proposed §§ 203.30 and report were set forth in proposed followups with licensed practitioners to 203.31.’’ Moreover, the word ‘‘written’’ § 203.31(d)(1) and (d)(2). Proposed see whether samples had been does appear in conjunction with § 203.31(d)(1) required the identification delivered. receipts in § 203.30, but not in § 203.31. of each drug sample in a Although Congress did not expressly As discussed in section II.J of this representative’s stock by the proprietary require a receipt for representative- document, request and receipt forms, or established name and dosage delivered samples in the act, FDA has reports, records, and other documents strength, and the number of sample concluded that additional requirements, and signatures required by PDMA and units. Proposed § 203.31(d)(2) required: including receipts, are necessary to help part 203 may be created on paper or on ensure effective enforcement, increased (i) A report of the physical count of the electronic media, provided that records most recently completed prior inventory; accountability and oversight of sample created on electronic media meet the (ii) A record of each drug sample shipment distribution, and to provide adequate requirements of revised § 203.60 and received since the most recently completed safeguards against drug sample part 11. In addition, although the final prior inventory, including the sender and diversion. All of these goals are regulations require that a receipt be date of the shipment, and the proprietary or consistent with and further the signed and returned to the manufacturer established name, dosage strength, and legislative intent in enacting PDMA. when a sample is received, they do not number of sample units received; Although samples delivered by a require that a receipt be left with the (iii) A record of drug sample distributions representative to a licensed practitioner practitioner for his or her records or that since the most recently completed inventory may be requested and delivered practitioners maintain records of showing the name and address of each recipient of each sample unit shipped, the simultaneously, this is not always the samples received. date of the shipment, and the proprietary or case. For example, the delivery of b. Section 203.31(c)(2). Proposed established name, dosage strength, lot or samples by a representative to a hospital § 203.31(c)(2) stated that if the drug control number, and number of sample units or health care entity pharmacy sample is received by the pharmacy of shipped; and designated by a physician may not a hospital or other health care entity at (iv) An explanation for any significant loss. occur at the same time a request for the request of a licensed practitioner, As discussed in section II.E of this such samples is made. When the request the receipt is required to contain, among document, the agency has on its own for and delivery of a sample by a other things, the name and address of initiative revised proposed § 203.31(d) representative do not occur the hospital or health care entity to more clearly distinguish between the

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One comment sought clarification that this requirement would not assist in practices.’’ Both comments cited the on whether the reconciliation report diversion detection because the batches statement in the preamble of the may consist of several documents that, are so large that significant numbers of proposed rule (59 FR 11842 at 11849) when taken together, contain all representatives in varying geographical that ‘‘it is FDA’s preliminary view that required information. areas will receive the same batch. The such an inventory must go beyond a The reconciliation report for an comment also stated that ‘‘existing mere physical count, and that individual sales representative may PDMA records’’ make it possible to meaningful information and data can consist of several paper documents and/ determine every physician called on by only be provided if the inventory is or electronic records. However, all representatives who could have conducted utilizing generally accepted documents or records are to be collected received the lot in question. The other inventory practices * * *.’’ The and maintained as a single comment stated that the requirement comments said that if generally reconciliation ‘‘report.’’ would ‘‘have little or no effect in accepted inventory practice refers to 30. Another comment stated that assuring a meaningful inventory,’’ but more than a physical count, FDA must ‘‘PDMA does not require manufacturers would increase difficulty of conducting clarify what is required. to annually compile a report for each inventory and preparing the report. As discussed in section II.E of this sales representative that summarizes in The requirement in proposed document, the final rule has been one place all aspects of each sample § 203.31(d)(2)(iii) was intended to revised to eliminate the use of the delivery in minute detail.’’ ensure that a manufacturer or phrase ‘‘generally accepted inventory Although PDMA does not explicitly authorized distributor maintains a practices’’ in conjunction with the require the information under record enabling it to track the inventory requirement. distribution of sample units by lot or 28. Several comments objected to the § 203.31(d)(2), it does establish an control number from a representative to requirements in proposed extensive scheme for monitoring drug § 203.31(d)(2)(ii) and (d)(2)(iii) because sample distributions by a representative a licensed practitioner. Although the the required information duplicates that includes requirements for drug agency agrees that such information information contained in sample request sample request forms, an annual would not necessarily enable forms and corporate distribution records inventory, and reporting of significant manufacturers or distributors to that are already on file. Two comments losses and known thefts of drug pinpoint the representative responsible stated that the reconciliation report samples. As discussed previously, the for distributing a sample unit that has should contain a reconciliation of agency believes that the requirements been diverted, it would promote opening and closing inventories against contained in § 203.31(d)(2)(ii) and precision in tracking samples and sample allocations received and sample (d)(2)(iii), including the requirement for facilitate the location of samples in the distributions, but not a statement of all identifying individual transactions event of a recall or other public health individual allocations and distributions. conducted with drug samples in revised emergency. Nevertheless, as discussed Another comment questioned whether § 203.31(d)(2)(iii), are necessary to bring below, the agency has determined that the inclusion of the information potential drug sample diversion manufacturers and authorized required under these sections in a single activities to the attention of distributors of record should be free to report is productive or merely an manufacturers and authorized choose the types of records used to track additional clerical burden. distributors. This objective is consistent the distribution of drug sample lots to The first comment correctly points with legislative intent in PDMA. licensed practitioners. Therefore, the out that the information required to be 31. Two comments recommended that proposed requirement for inclusion of contained in the reconciliation report manufacturers should be permitted to lot or control numbers in the under revised § 203.31(d)(2)(ii) and use bar coding that represents the reconciliation report has been (d)(2)(iii) will come from various proprietary or established name and eliminated in the final rule. sources, including drug sample request dosage strength on the inventory record d. Section 203.31(d)(3). Proposed and receipt forms, distribution records and reconciliation report instead of § 203.31(d)(3) stated: ‘‘The inventory required to be created and maintained actual words. One of the comments said and reconciliation reports shall be under the current good manufacturing that such coding is ‘‘easily translated’’ conducted and prepared by persons practice (CGMP) regulations (see, e.g., into the required information. other than the representatives being 21 CFR 211.196), and other records The agency advises that it does not inventoried or superiors or managers in maintained by the representative or the object to the use of bar coding that their department, division, or branch, or firm. Nevertheless, the agency believes represents required information in the in their direct line of supervision or that the assimilation of information inventory record or reconciliation report command.’’ from these multiple records into a single provided that the information in such a 33. Three comments stated that the report that concisely identifies and form can be used by the firm to conduct proposed requirement represents a characterizes each type of transaction the reconciliation process and to detect misinterpretation of PDMA and its conducted with drug samples will aid discrepancies in inventory and potential legislative history regarding section industry in detecting discrepancies in drug diversion. In addition, the bar 303(b)(4)(B)(ii) of the act. The comments inventory that may be indicative of drug coding must be capable of being stated that this section allows a sample diversion activity. In addition, it translated into words and the record or manufacturer the option of performing will permit FDA and other Federal and report must be capable of being an independent audit to protect itself State government agencies responsible produced in its entirety upon request by from civil liability for the acts of its for enforcing PDMA to effectively FDA or other Federal, State, or local law representatives, but that FDA has oversee a company’s conduct in enforcement authorities. misconstrued the section to mean that

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PDMA requires a yearly, independent representative’s district manager to since manufacturers are permitted, audit of every representative. perform the inventory function. under § 203.37, to determine what The comments apparently The objective of the proposed constitutes a ‘‘significant loss,’’ they misunderstand the terms ‘‘inventory’’ requirement was to guard against errors should also be allowed to determine and ‘‘audit.’’ An inventory is an and possible fraud in the conduct of the which discrepancies merit investigation. itemized list or catalog of goods or physical inventory and reconciliation, Another comment recommended property, usually taken annually. An and in the preparation of the inventory revising ‘‘apparent discrepancy’’ to read audit is a formal, periodic examination record and reconciliation report, by the ‘‘potentially significant discrepancy.’’ and checking of accounts or records to representative or other interested The agency is not requiring verify their correctness. (Webster’s New parties. Although the agency continues manufacturers and distributors to World Dictionary, 2d College Ed.) The to believe that this is a legitimate and conduct an investigation every time comments correctly assert that section important objective, the agency agrees there is an apparent discrepancy in a 303(b)(4)(B)(ii) of the act does not that it can be achieved through less representative’s inventory, but rather require an annual audit of all burdensome means than by requiring that they evaluate all apparent representatives. However, proposed the inventory and reconciliation to be discrepancies. It is only when an § 203.31(d)(3) did not establish an audit conducted by persons other than the apparent discrepancy cannot be justified requirement, but rather set forth representatives, their superiors or that an investigation is required. requirements concerning which managers, or others in their direct line Investigations under these personnel are to conduct the inventory of supervision or command. circumstances are reasonable and and reconciliation and prepare the Accordingly, the agency has revised the consistent with the requirement in inventory record and reconciliation proposed requirement to permit revised § 203.37(a) to investigate when report. The proposed requirement was manufacturers and distributors to take there is a reason to believe that any therefore intended to implement the ‘‘appropriate internal control measures’’ person has falsified drug sample records requirement in section 503(d)(3)(C) of to guard against error and possible fraud or is diverting drug samples. the act for an annual inventory of drug in the conduct of the physical inventory Accordingly, the agency declines to samples in the possession of a and reconciliation, and in the amend the requirement. representative, rather than section preparation of the inventory record and 303(b)(4)(B)(ii) of the act. reconciliation report. 3. Issues Related to Sample Distribution 34. Several comments said that the Under the revised requirement, by Mail or Common Carrier or by a proposed requirement is too costly, and representatives and their supervisory Representative or Detailer the ends can be achieved through more personnel may conduct the inventory a. Sections 203.30(a)(1) and cost-effective means. Several comments and reconciliation functions and 203.31(a)(1). Proposed §§ 203.30(a)(1) stated that since inventory must be prepare inventory records and and 203.31(a)(1) required that a licensed completed onsite, it would be too costly reconciliation reports. However, the practitioner execute and submit a to require personnel other than agency expects that appropriate internal written request to the manufacturer or supervisors or managers within the control measures will be taken that authorized distributor of record to geographic area of the representative to include implementation of a security obtain drug samples. perform it. On the other hand, the and audit system that is controlled by 36. One comment stated that a request comments said, reconciliation can be independent personnel, i.e., personnel form ‘‘creates additional paperwork and performed at a central location, thus it other than the representatives, their expense without apparent benefit is more susceptible to completion by superiors or managers, or others in their beyond that obtained by signing a independent personnel. direct line of supervision or command. receipt form at the time of delivery of Two comments distinguished Under revised § 203.34(b), such a the samples.’’ inventory from reconciliation by stating security and audit system must follow a In sections 503(d)(2)(A)(i) and that the former is relatively simple and plan that ensures that random audits are (d)(3)(A)(i) of the act, Congress can be performed by sales management, conducted on representatives by specifically required that a drug sample while the latter is more complex and personnel independent of the sales be distributed only in response to a should be done by a person force. In addition, the plan must ensure written request by a licensed independent of sales and marketing. In that for-cause audits are initiated in practitioner to ensure accountability in contrast, another comment response to reports, incidents, or the sample distribution process. recommended allowing representatives findings identified by the firm as Sections 203.30 and 203.31 reflect those to perform the reconciliation, but not indicating possible drug sample statutory provisions. the inventory function. diversion or falsification of sample 37. Another comment sought One comment recommended allowing distribution records. If necessary, the clarification on whether the term anyone but the representative to agency will issue additional guidance ‘‘written request’’ includes preprinted perform the inventory or prepare the on audit plans and procedures under forms. reconciliation report. Several comments revised § 203.34(b). Preprinted drug sample request forms recommended allowing a sales e. Section 203.31(d)(4). Proposed are permissible. However, they must representative’s direct supervisor or § 203.31(d)(4) stated: ‘‘A manufacturer contain all information required by manager to perform the inventory or authorized distributor of record shall PDMA and the final regulations, and function because that person is in the carefully evaluate any apparent must be signed by a licensed best position to assess the performance discrepancy or significant loss in its practitioner. and cooperation of a representative and inventory and reconciliation, and shall b. Sections 203.30(a)(3) and to initiate corrective actions. One fully investigate any such discrepancy 203.31(a)(3). Proposed § 203.30(a)(3) comment recommended allowing or significant loss that cannot be required that the recipient of a drug anyone other than a representative or justified.’’ sample delivered by mail or common his direct supervisor to perform the 35. Two comments stated that the carrier return the receipt to the inventory. Other comments word ‘‘apparent’’ should be changed to manufacturer or distributor from which recommended allowing a ‘‘significant’’. One comment stated that the drug sample was received. Proposed

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§ 203.31(a)(3) required that the receipt c. Sections 203.30(b)(1)(ii) and general identification purposes. for samples distributed by means other 203.31(b)(1)(ii). Proposed § 203.30(b)(1) Accordingly, the agency has modified than mail or common carrier be and (b)(1)(ii) stated: ‘‘A written request the requirement in the final rule to returned to the manufacturer or for a drug sample to be delivered by specify that State license or distributor. mail or common carrier to a licensed authorization numbers are to be used on 38. Two comments requested practitioner is required to contain the sample request forms generally, and clarification on whether, if a licensed following: * * * The practitioner’s DEA numbers are to be used only when practitioner fails to return a receipt, he State license number or Drug a sample of a scheduled drug product is or she is barred from receiving further Enforcement Administration requested. samples from a manufacturer. Both identification number.’’ Proposed 41. Several comments asked for comments argued that the intent of § 203.31(b)(1) and (b)(1)(ii) set out the clarification on whether a manufacturer Congress in enacting PDMA was to same requirement for requests for drug or authorized distributor would be detect patterns of nonreturns of receipts. samples delivered by means other than required under this section to verify the The comments recommended that mail or common carrier. State licensing or DEA number on the licensed practitioners should not be 39. FDA received 15 comments on request form. One comment stated that barred for isolated failures to return these requirements. Many of the the provision of a State license or DEA receipts, but rather, where a pattern of comments supported the overall goal of number, without verification, would not nonreturns exists, manufacturers should these sections, i.e., to ensure that confirm that a practitioner is in fact be required to investigate to see if the persons requesting drug samples are licensed. Other comments opposed a samples actually arrived. licensed practitioners. However, several requirement that the manufacturer or comments stated that State license authorized distributor verify the State The question of whether a licensed numbers are not always assigned to licensing or DEA number. One comment practitioner should be barred from practitioners who are otherwise recommended that the presence of the receiving further drug samples for authorized by State law to prescribe number on a sample request form be failing to return drug sample receipts drugs. The comments requested deemed acceptable on its face. Two was not addressed in the proposed rule, clarification as to what verification is comments recommended that instead of and was not addressed directly by appropriate for practitioners subject to requiring the manufacturer to verify Congress. In the legislative history of different authorization mechanisms whether the requesting person is a PDMA (see H. Rept. 100–76, p. 15), than physicians. licensed practitioner, the person Congress stated: ‘‘Whether the As was discussed in response to the requesting samples could be required to distributions are made by carrier return comments on the definition of licensed attest to being a licensed practitioner on receipt or business reply cards, practitioner, the agency has determined the sample request form, i.e., with the manufacturers or distributors would not that practitioners authorized by State inclusion of a preprinted line next to be expected to equate each and every law to prescribe drugs may request and where his or her signature would go. delivery and receipt; however, an receive drug samples. Practitioners who Three comments recommended that an adequate monitoring system would are authorized by a State to prescribe internal number established by the necessarily need to detect instances drugs and have no State license number manufacturer after checking a where non-return patterns exist.’’ Thus, may use any number assigned to them requesting practitioner’s credentials be there is evidence that Congress was not by the State that represents that they are considered acceptable. primarily concerned with isolated authorized to prescribe drugs. The FDA has determined that verification failures to return drug sample receipts, agency is not aware of any State that by a manufacturer or authorized but with patterns of nonreturns. does not assign some type of number to distributor of the State license or Moreover, the overall structure of practitioners that it authorizes to authorization number, or the DEA PDMA is not intended to penalize prescribe drugs. However, if such a case number as appropriate, is necessary and practitioners or prevent them from arises, the agency will consider how to has codified the requirement in receiving samples, but rather to ensure provide verification at that time. §§ 203.30(a)(2) and 203.31(a)(2) of the that samples are properly distributed to 40. Several comments cited potential final rule. The agency does not believe licensed practitioners. Therefore, the problems with the use of DEA numbers that allowing a manufacturer to deem agency believes that Congress did not for verification. Several comments said acceptable the number on a request form intend for licensed practitioners to be that not all licensed practitioners, but without verifying its authenticity would barred from receiving samples for only those who prescribe controlled offer any assurance that a person isolated failures to return sample substances, are issued Drug requesting samples is in fact licensed or receipts or for isolated instances where Enforcement Administration (DEA) authorized to prescribe drugs. Similarly, receipts are not received for reasons numbers. Other comments stated that, an attesting signature on a request form beyond the practitioner’s control. although DEA numbers can be accessed offers little more assurance that a person However, upon detecting a pattern of through a central data base, this practice is in fact licensed or authorized than an nonreturns by a practitioner, a is discouraged by DEA unless a unverified license or authorization manufacturer or authorized distributor controlled substance is involved. One number. The agency does believe there should not distribute further samples comment stated that DEA numbers are is merit in the suggestion that, once a until the matter is thoroughly often improperly accessed and illegally practitioner’s number is verified by a investigated. Such an investigation may, used to divert drugs and recommended manufacturer or distributor with a State depending on the circumstances, be that only State license numbers be used. licensing board or the DEA, an internal required under § 203.37, since a pattern The agency has consulted with the number or other tracking system may be of nonreturns may indicate that a DEA on the appropriate use of DEA devised such that the number does not representative is falsifying drug sample numbers for identification purposes. have to be reverified every time a requests, that other drug diversion DEA policy is that registration numbers sample is requested by the same activity is occurring, or that a significant assigned by DEA to licensed practitioner. However, any list of loss or theft of drug samples has practitioners are to be used only to verified State license or authorization occurred. obtain scheduled drug products, not for numbers maintained by an authorized

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The requirement contains all State licensing numbers, drug sample requested appear on the will help ensure that the parties State licensing boards do not possess sample request form. involved in and responsible for sample mechanisms to provide wide-scale 45. Two comments requested that the distribution can be readily identified by verification services, and methods of proposed sections be revised to allow FDA and other government agencies. verification vary from State to State. bar coding on the request form that This purpose is consistent with As discussed in section IV.B of this represents the name and strength of the legislative intent to ensure that document, the agency believes that cost- drug sample. Both comments indicated distributors of drug samples are efficient systems for verifying State that the bar coding would be translated authorized distributors of record, and licensing numbers will be made into words on the form so that the the agency therefore adopts the available to manufacturers and doctor would know what he or she was requirement in the final rule. authorized distributors of record in the requesting. f. Sections 203.30(c)(1) and (c)(2) and near future. Until that time, State The agency has no objections to 203.31(c)(1) and (c)(2). Proposed licensing boards do possess sufficient allowing bar coding representing §§ 203.30(c) and 203.31(c) set forth the mechanisms to provide verification that information on preprinted sample requirement that drug sample receipts individuals are licensed by them. The request forms where that information is contain, among other things, the lot or agency recognizes that there may be also translated into words on the form. control number of the drug sample some difficulty associated with However, the bar coding must not cover delivered. verifying State license or authorization up or otherwise detract from the ability 47. FDA received several comments numbers. However, State licensing of practitioners to read the words on the that objected to the sample lot or control numbers are the only reliable way of form. number requirements and proving that a practitioner is actually e. Sections 203.30(b)(1)(v) and recommended that they be eliminated. licensed by a State to prescribe drugs. 203.31(b)(1)(v). Proposed §§ 203.30(b)(1) Two of these comments objected to the 43. One comment recommended that and 203.31(b)(1) set forth the requirement for representative delivered FDA require States to adopt uniform requirements for contents of written samples only, while the remaining methods of assigning licensing numbers. request forms for delivery of samples by comments objected to the requirement The power to set prescribing mail or common carrier and by for both samples delivered by mail or requirements and methods is one that representative, respectively. Proposed common carrier and by representative. has traditionally been vested in the §§ 203.30(b)(1)(v) and 203.31(b)(1)(v), Several comments argued that, under States. The agency does not wish to which are identical, required that the existing CGMP requirements, the interfere with this power by requiring request form contain ‘‘the name of the requirement is not necessary because that States adopt uniform methods of manufacturer and the authorized distribution of sample lots is tracked by assigning State licensing numbers. distributor of record, if the drug sample the manufacturer to the representative, 44. Several comments recommended is requested from an authorized who keeps a record of the practitioners that FDA add the American Medical distributor of record.’’ visited and the samples that are Association’s Medical Education (ME) 46. FDA received four comments on distributed. Two comments stated that number to the list of permissible these sections. One comment objected to recording lot numbers on sample verification numbers. The comments the requirement in § 203.31(b)(1)(v) that receipts is an inefficient way of tracking stated that the advantages of this the names both of the manufacturer and sample lots to the practitioner level, and number are that it is centrally of the distributor be included on the that the method of tracking should be accessible, it is not subject to change as request form. The comment stated that left to manufacturers as long as they can State license numbers may be, and it this requirement is redundant since the provide accurate and timely lot specific includes at least some nonphysician manufacturer and authorized distributor records. Other comments argued that practitioners. Two comments also of record are responsible for knowing lots should only have to be tracked recommended that use of the each other, and if a diverted sample is down to the representative level. Association of Physician’s Assistants found, the manufacturer will be able to The agency believes that the tracking file number be permissible. trace the sample to the authorized of sample distributions by lot to the The agency has concluded that where distributor. Three comments objected to level of the licensed practitioner is a practitioner has a State license the requirement in both essential both to maintaining number, that number must be used for §§ 203.30(b)(1)(v) and 203.31(b)(1)(v). accountability and oversight over verification purposes. As discussed These comments stated that requiring sample distribution and to facilitating above, nonphysician practitioners who the names both of the manufacturer and recalls and, therefore, declines to are licensed, or who are not licensed but of the authorized distributor of record eliminate the proposed requirements on are authorized by State law to prescribe causes additional recordkeeping the ground that samples need only be drugs, may use any number assigned to burdens, serves no useful purpose, and tracked to the representative level. The them by the State that represents that is contrary to the explicit language of agency agrees, however, that recording they are authorized to prescribe drugs. section 503(d)(3)(A) of the act. lot numbers on drug sample receipts The agency does not believe that other A distributor may distribute drug and other drug sample distribution types of identification, including samples under section 503 of the act records required under part 203 may not numbers assigned to health only if it is an authorized distributor of be the most efficient method of tracking professionals in connection with record for the manufacturer of the drug. sample lots and that manufacturers and membership in professional Thus, the ability of a distributor to authorized distributors should be free to associations, are reliable means of distribute samples is directly related to use other types of records to accomplish

VerDate 29-OCT-99 09:33 Dec 02, 1999 Jkt 190000 PO 00000 Frm 00045 Fmt 4700 Sfmt 4700 E:\FR\FM\A03DE0.001 pfrm02 PsN: 03DER1 67738 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations this purpose. Accordingly, the agency (g) Storing drug samples by investigate potential cases of diversion, has eliminated the requirement to representatives. it does not ensure that effective written include lot or control numbers on drug As discussed in section II.G of this procedures and administrative systems sample receipts in revised document, the requirements in are in place to do so. §§ 203.30(c)(1) and (c)(2) and proposed § 203.34 have been 50. Another comment requested that 203.31(c)(1) and (c)(2) and on renumbered and revised in the final the requirement in proposed § 203.34(c) reconciliation reports in revised rule. Comments on the proposal are for an inventory schedule be flexible so § 203.31(d)(2)(iii). Moreover, the addressed in light of the revisions. that a procedure committing to conduct requirement under proposed § 203.38(b) 48. One comment stated that PDMA a field force inventory at least yearly to include lot or control numbers on all only requires manufacturers to develop would be sufficient. drug sample distribution records has adequate audit and security systems to Administrative procedures adopted detect and investigate losses and thefts, been substantially revised. Under by manufacturers and authorized not to create and adhere to extensive revised § 203.38(b), manufacturers and distributors of record must be adequate written policies documenting all aspects authorized distributors of record are to ensure compliance with PDMA and of the drug sampling process. The required to maintain drug sample agency requirements. With respect to comment stated that a manufacturer distribution records containing lot or the requirement in revised § 203.34(b)(2) should not be subject to liability for control numbers that are sufficient to for written policies and procedures failing to have a written corporate-wide permit tracking of drug sample units to describing administrative systems for policy on the subject matter covered by the point of the licensed practitioner. conducting the annual physical the proposed rule. inventory, the administrative Sample distribution records containing The agency believes that the creation procedures must ensure that all lot or control numbers must be of internal policies by a manufacturer or representatives are inventoried at least maintained by manufacturers or authorized distributor of record to once a year in accordance with the authorized distributors whether the achieve the statutory objectives is requirements of § 203.31(d) and section samples are distributed by the mail or important to the attainment of those 503(d)(3)(C) of the act. through representatives. objectives. PDMA sets forth 4. Drug Sample Forms requirements that manufacturers and 6. Use of Third Parties Proposed § 203.33 stated: authorized distributors of record report a. Section 203.36(a). Proposed A sample request or receipt form may be significant losses and thefts of samples, § 203.36(a) stated: delivered by mail, common carrier, or private that manufacturers’ and authorized Any manufacturer or authorized distributor courier or may be transmitted distributors’ representatives be of record that uses a fulfillment house, photographically or electronically (i.e., by inventoried at least annually, and that shipping or mailing service, or other third telephoto, wirephoto, radiophoto, facsimile drug samples be subject to proper party, or engages in a comarketing agreement transmission (FAX), xerography, or electronic storage conditions. In addition, PDMA’s with another manufacturer or distributor to data transfer) or by any other system, legislative history indicates that distribute drug samples or to meet any of the requirements of PDMA, PDA, or this part, provided that the method for transmission Congress intended that manufacturers meets the security requirements set forth in remains responsible for creating and § 203.60(d). and authorized distributors have audit maintaining all requests, receipts, forms, Due to the publication of part 11, and security systems in place to detect reports, and records required under PDMA, which supersedes portions of proposed losses and thefts, as well as falsified or PDA, and this part. § 203.60, the security requirements that incomplete drug sample records. (H. 51. One comment supported the apply to paper documents transmitted Rept. 100–76, p. 20, S. Rept. 100–202, section as written. Several comments photographically, electronically, or by p. 9.) Accordingly, the agency believes requested clarification on whether the any other system have been modified that it is authorized to implement manufacturer or authorized distributor and appear under § 203.60(c) in the final specific requirements regarding must itself create and maintain forms rule. Section 203.33 has been revised to procedures and systems to accomplish and records or ensure proper refer to this section. these legislative objectives. However, compliance by the third party. Several the agency believes that industry should comments objected to the former 5. Policies and Procedures have the flexibility to develop its own interpretation on the ground that it Proposed § 203.34 stated: procedures and systems, as long as such would require so much involvement by Each manufacturer or authorized procedures and systems are documented the manufacturer or authorized distributor of record that distributes drug and followed. distributor in the day-to-day operations samples shall establish, maintain, and adhere 49. One comment stated that, under of the third party that it would to written policies and procedures describing PDMA, a manufacturer is already liable effectively preclude companies from its administrative systems for the following: for failing to identify and report losses, using third parties. (a) Distributing drug samples by mail or The agency clarifies that a common carrier, including methodology for thefts, or falsification of records, reconciliation of requests and receipts; whether it has written policies or not. manufacturer or authorized distributor (b) Distributing drug samples by means Thus, according to the comment, of record that uses a third party to other than mail or common carrier including written procedures are not necessary to distribute drug samples or meet any the methodology for their independent ensure that significant losses of samples requirements of PDMA or the final rule sample distribution security and audit are detected. may have the third party create and system; Section 301(t) of the act subjects maintain required requests, receipts, (c) Conducting its inventory of drug manufacturers and authorized forms, reports, and records. For samples under § 203.31(d), including an distributors to civil and criminal example, a shipping company that inventory schedule; penalties for failure to report significant delivers samples would be permitted to (d) Auditing and detecting falsified or incomplete drug sample records; losses and thefts as required under use its own delivery verification (e) Identifying any significant loss of drug section 503(d)(3)(D) of the act. While the receipts and to maintain those receipts samples and notifying FDA of the loss; agency recognizes that this provision for the manufacturer or authorized (f) Monitoring any loss or theft of drug provides incentive for a manufacturer or distributor. However, the manufacturer samples; and authorized distributor to identify and or authorized distributor is responsible

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In the authorized distributor of record that notice to FDA, and (4) the form of the previous example, if all of the contracts with a third party to maintain notice and reporting requirements. information required in § 203.30 is not some or all of its records shall produce Two comments addressed the level of contained on the shipping company’s required documents within 48 hours of suspicion of falsification that is receipt, the manufacturer or authorized a request by an authorized necessary to trigger the investigation distributor is responsible for representative. requirement. One comment said that the compliance, and thus liable for 53. Several comments stated that 48 ‘‘reason to believe’’ language that noncompliance, with § 203.30. hours is not enough time to produce appears in § 203.37(a)(1) creates a Additionally, the agency is aware that required documents. Three comments standard that is ‘‘vague and difficult to some drug manufacturers contract with recommended that the section be interpret.’’ Another comment stated that an ‘‘outside’’ promotional sales force revised to allow 5 working days for ‘‘reason to believe needs to be defined rather than maintaining an ‘‘in-house’’ production of records. One comment so that a manufacturer will not be one. These representatives, known in stated that a manufacturer should be second guessed.’’ Another comment the industry as ‘‘contract excused from penalty when requested stated that the proposed rule does not representatives,’’ qualify as third parties information in the storage of a third define what constitutes ‘‘falsification,’’ under this section. Since contract party is not produced within 48 hours and that variances in a representative’s representatives may be paid according by reason of ‘‘unanticipated events reported numbers do not usually give to the number of samples distributed, beyond the reasonable control of either rise to a ‘‘reason to believe’’ that a firms using their services should be the drug manufacturer or the contractor falsification has occurred, requiring particularly vigilant concerning the (i.e., a force majeure defense).’’ The investigation and notice, but rather that possibilities for sample diversion and comment stated that, at a minimum, the a representative has poor work habits. sample request and receipt form section should be amended to provide The comment stated that requiring falsification. 48 business hours to comply. investigation of every variance would be ‘‘unrealistic.’’ 52. One comment requested In response to the comments, the Instances of potential falsifications are clarification as to whether, if a agency has revised proposed § 203.36(b) to require the production of records most likely to come to the attention of manufacturer enters into a comarketing manufacturers or authorized distributors agreement with another manufacturer maintained by a third party within 2 business days of a request, rather than through discrepancies that are for the distribution of samples by its uncovered during the required annual representatives, the comarketer would 48 hours. The agency believes that this period should be sufficient given the inventory and reconciliation. However, thereby become an authorized it is possible that other events or distributor of record and would thus be fact that most records are maintained electronically and can be quickly and occurrences, some foreseeable and some responsible for creating and maintaining not, may bring potential falsifications to its own reports, forms, and records. easily retrieved and transmitted to the location where they are requested. the attention of a manufacturer or Another comment contended that distributor. The agency has determined comarketers could qualify as 7. Investigation and Notification that the reason to believe standard, manufacturers or authorized distributors Requirements while not capable of precise definition, of record and recommended that the a. Section 203.37(a)(1) and (a)(2). is flexible enough to cover the final rule be revised to make Proposed § 203.37(a)(1) stated: multiplicity of situations in which comarketers who are themselves A manufacturer or authorized distributor of potential falsification is brought to light. manufacturers or authorized distributors record that has reason to believe that any Moreover, the standard is one that can responsible as such for compliance with person has falsified drug sample requests, be applied by manufacturers and PDMA. receipts, or records shall conduct a full and authorized distributors using common complete investigation, and shall notify FDA, As the agency explained under the sense and good judgment. While the comments on the definition of ‘‘ongoing by telephone or in writing, within 5 working days of becoming aware of a falsification and agency does not expect manufacturers relationship,’’ a comarketer, sample within 5 working days of the completion of and authorized distributors to fulfillment house, or other entity that an investigation. investigate every slight discrepancy, the performs sample distribution functions Proposed § 203.37(a)(2) stated: ‘‘A agency would require investigation other than delivery or functions that are manufacturer or authorized distributor under this standard where a pattern of incidental to delivery is engaged in of record shall provide FDA with a discrepancies exists or where other ‘‘distribution’’ of drug samples and complete written report, including the reliable information indicates that must, under section 503(d) of the act, be reason for and the results of the records have been falsified. an authorized distributor of record. investigation, not later than 30 days 55. Another comment said that the Authorized distributors of record are after the date of the initial notification.’’ circumstance that triggers the responsible for complying with all The agency, on its own initiative, has investigation requirement should be requirements for sample distribution reformatted proposed § 203.37(a)(1) and diversion, not falsification. That under PDMA and the final rule, (a)(2) into § 203.37(a)(1), with three comment also stated that the including creating and maintaining all subsections. The agency believes that investigation requirement should apply required requests, receipts, forms, the new format is clearer and easier to only to a manufacturer’s or authorized reports, and records. Thus, if a understand. distributor’s employees’ misconduct, manufacturer or authorized distributor 54. FDA received 10 comments on not to any person. contracts with a third party which itself these sections addressing the following The drug sample recordkeeping becomes an authorized distributor of issues: (1) The circumstances under requirements were instituted to help record, the manufacturer or authorized which a manufacturer or authorized ensure that drug diversion schemes distributor and the third party are both distributor should be required to could be detected. The agency believes responsible for compliance with PDMA investigate, (2) the time period to that patterns of falsification of drug requirements. complete investigation, (3) when and sample requests, receipts, or records,

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Thus, The agency recognizes, however, that becoming aware of a falsification.’’ the agency disagrees with the circumstances other than record According to the comment, the notice recommendation that notice should not falsification may be indicative that drug discussed in the preamble may precede be provided to FDA until an sample diversion is occurring. the notice required under the proposed investigation is completed and a strong Accordingly, the agency has revised regulation. probability of records falsification exists proposed § 203.37(a) to require The agency acknowledges that the or until records falsification is notification, investigation, and reporting notice discussed in the preamble of the confirmed. In addition, submission of a where a manufacturer or authorized proposal (59 FR 11842 at 11851) is final written report to FDA stating the distributor of record has reason to different than the notice that would be reasons for and the results of an believe that any person is diverting required under the proposed regulation. investigation is necessary, even where prescription drug samples. The agency has revised proposed falsification has not been found, to Finally, the agency believes that the § 203.37(a)(1) and (a)(2) to require that permit FDA to determine whether the manufacturer or authorized distributor a manufacturer or authorized distributor circumstances were adequately of record is in the best position to detect of record that has reason to believe that investigated and explained. potential diversion not only by its own any person has falsified drug sample 59. One comment stated that reports employees, but by other persons, such requests, receipts, or records, or is of some complex cases could require as contract representatives. Accordingly, diverting drug samples must notify FDA more than 30 days to complete and the agency has determined that within 5 working days, immediately requested that the proposed rule be manufacturers and authorized initiate an investigation, and submit a revised to allow for 30 days, except in distributors must investigate when they written report to FDA within 30 days ‘‘unusual circumstances.’’ Another have reason to believe that any person after the date of the initial notification. comment recommended allowing has falsified drug sample records or has Thus, the requirement in proposed completion of the investigation within a diverted drug samples. § 203.37(a)(1) that a manufacturer or ‘‘reasonable time,’’ while another 56. Two comments stated that PDMA distributor notify FDA within 5 working recommended that there should be no statutory requirements did not make days of becoming aware of a falsification time restriction for the submission of a falsification of drug sample records and within 5 working days of the final report. reportable to FDA. completion of an investigation has been The final rule as revised gives Although PDMA did not expressly eliminated. The agency believes that the manufacturers 30 days to complete an make falsification of drug sample provision of a single notice to FDA near investigation of possible falsification records reportable to FDA, the agency the time when an investigation is and to submit a written report. The has determined that such notice is initiated is sufficient. agency believes that this amount of time necessary and furthers the legislative 58. One comment said that firms is more than adequate in all but the intent in PDMA. Persons who falsify should be required to provide notice to most complex cases. In such cases, a drug sample requests, receipts, or FDA only in ‘‘situations where preliminary report may be submitted records may be criminally prosecuted substantial evidence of apparent describing the investigative measures under sections 301 and 303 of the act, attempts to conceal diversion of samples taken, a summary of the findings of the and under Title 18 of the United States exists.’’ Another comment stated that investigation up to that time, the nature Code. Because FDA is responsible for notice should not be required until a of the ongoing investigation, and the enforcing PDMA, it is necessary that the ‘‘strong probability’’ of falsification is reasons the investigation was not agency have all pertinent information indicated by an investigation. Several completed within the required time. regarding such potentially criminal comments stated that, except for a final b. Section 203.37(b)(1) and (b)(2). conduct. Moreover, Congress did written report submitted at the Proposed § 203.37(b)(1) stated: explicitly make significant losses and completion of an investigation revealing A manufacturer or authorized distributor of known thefts reportable to FDA, that falsification has in fact occurred, no record that distributes drug samples or a presumably because such losses and notice should be required. One of these charitable institution that receives donated thefts indicate possible sample comments stated that it would be drug samples from a licensed practitioner diversion activity. (See S. Rept. 100– ‘‘improper and unfair’’ to implicate shall notify FDA, by telephone or in writing, 303, p. 6, H. Rept. 100–76, p. 16.) As within 5 working days of becoming aware of employees in falsification before all of any significant loss or known theft of drug discussed previously, the agency the facts are known and an informed samples and within 5 working days of the believes that falsifications of drug judgment can be made with respect to completion of an investigation into a report sample records are highly probative that responsibility. One comment of a significant loss or known theft. drug diversion is taking place. Thus, the recommended that a written report Proposed § 203.37(b)(2) stated: ‘‘A agency has determined that it is should be made available, but not manufacturer or authorized distributor consistent with congressional intent that automatically submitted, to FDA. of record shall provide FDA with a the agency be made aware of such The agency believes that the complete written report not later than falsifications, as well as other activity manufacturer or authorized distributor, 30 days after the date of the initial that is indicative of drug sample through its own investigation, is in the notification.’’ diversion, to enable FDA to monitor best position to determine whether On its own initiative, the agency has compliance with PDMA. falsification has occurred. However, for reformatted and revised these sections 57. One comment noted that enforcement purposes, it is necessary into a single section, § 203.37(b)(1), with statements made in the preamble to the that FDA be notified when there is three subsections. The revised section proposal (59 FR 11842 at 11851) reason to believe that there has been a eliminates the requirement in proposed conflicted with proposed § 203.37(a)(1). falsification to ensure that an § 203.37(b)(1) for notice to be given to

VerDate 29-OCT-99 09:33 Dec 02, 1999 Jkt 190000 PO 00000 Frm 00048 Fmt 4700 Sfmt 4700 E:\FR\FM\A03DE0.001 pfrm02 PsN: 03DER1 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations 67741 the agency within 5 days of the loss and solicited comment on how to reported and investigated) and losses of completion of an investigation of distinguish between significant losses drug samples in transit, establishing a significant loss or known theft, but and minor accounting or inventory predefined threshold based on a set otherwise retains and clarifies the errors. The agency did not propose to dollar amount or other criteria, such as requirements in proposed § 203.37(b)(1) establish a tolerance level for sample a fixed number of sample units, may be and (b)(2). losses below which no report is appropriate. The size of the 60. Two comments recommended required, and stated that each manufacturer or authorized distributor revision of proposed § 203.37(b)(1) to manufacturer or distributor is required of record, the number of representatives, extend the time a manufacturer or to establish its own threshold for and size and value of a firm’s total authorized distributor has to notify FDA determining when inventory not inventory, as well as a firm’s past after becoming aware of a significant accounted for is significant. experience with sample losses, are loss or theft, with no notification One comment stated that losses may relevant factors in determining the level required if subsequent investigation occur in several ways, including losses of the threshold. However, the agency reveals no loss or theft. One of the of shipments in transit, loss by also agrees with the second comment comments said that it would not be representatives, and unexplained that firms should remain responsive to possible to differentiate insignificant inventory discrepancies. The comment the individual circumstances accounting mistakes and actual losses stated that, for shipping losses, it may surrounding a single loss event, such as within 5 days of learning of an be appropriate for companies to set a the loss of a drug with a particularly inventory discrepancy and that the dollar amount above which a single loss high potential for diversion, to requirement would cause too many false is considered significant. This amount determine whether a loss is significant alarms. would vary by company and would be even though the size of the loss does not Unlike falsifications of drug sample dependent on the size of the company, meet the firm’s predefined threshold. records, the agency requires notice of number of representatives, and size and Regarding potentially significant significant losses and known thefts only value of its total inventory. The losses that are revealed through when a manufacturer or authorized comment stated that shipping losses unexplained inventory shortages, the distributor ‘‘becomes aware’’ of such should also be viewed cumulatively agency stated in the preamble to the losses or thefts. Thus, the level of over a ‘‘fixed, rolling period of time’’ to proposed rule that it does not seek to certainty under which notice and determine if there is a pattern of losses receive reports concerning minor investigation are required is higher for that might indicate diversion. Regarding mathematical errors that are caught and losses and thefts than it is for unexplained inventory shortages, the corrected in the normal course of falsifications. Consequently, a comment stated that each company business. The agency stated that firms manufacturer or authorized distributor should be required to establish its own are required to establish their own should have already differentiated threshold for determining when threshold for distinguishing between insignificant accounting mistakes and inventory not accounted for is insignificant accounting mistakes and actual losses before notice is given to significant. Inventory discrepancies that significant losses in inventory shortages FDA. Thus, the agency believes that 5 can be shown to be caused by math or based on the firm’s past experience in working days from the time that a accounting errors or mistakes that can sample distribution and inventory and manufacturer or authorized distributor be reconciled should not be reported. the level of accuracy of its internal audit becomes aware of losses or thefts is The comment stated that there are three and security system. The agency also sufficient to provide notice to FDA of significant loss scenarios that may stated that some manufacturers or losses or thefts. indicate possible diversion: (1) A single distributors might be able to set a 61. Two comments recommended loss that exceeds a company’s ‘‘historically validated statistical allowing 45 days after becoming aware predefined threshold; (2) the number of baseline’’ for minimal amounts of of significant losses during shipment loss events over a fixed, rolling period inventory shrinkage caused by routine before notice is required, because such exceeds the company’s threshold; or (3) accounting errors, mistakes, or losses, apparent losses of drug samples often the volume of losses over a fixed, rolling and a statistical baseline for the show up during that time period. period exceeds the company’s frequency of occurrences (59 FR 11842 The agency declines to follow the threshold. at 11851). The views expressed by the recommendation of the comments. One comment stated that loss of a second comment regarding discerning Potential significant losses that occur certain quantity of one drug sample significant losses from inventory during shipping must be investigated with a high potential for diversion may shortages thus appear to be consistent and reported like other significant be significant, while the loss of the same with those previously set forth by the losses. When samples thought to be lost quantity of another sample with a low agency. or stolen during shipping are later potential for diversion may not be 63. One comment supported found, a followup report should be significant. Therefore, the comment permitting manufacturers and made to the agency describing the asserted, no universally applicable distributors to establish their own circumstances of the recovery and the threshold can be established and a case- thresholds for determining when quantity of samples that were recovered. by-case analysis must be employed. inventory not accounted for is 62. In the preamble to the proposed One comment requested that FDA significant, but said that it was rule (59 FR 11842 at 11851), the agency clarify that not all physical losses are concerned about being second-guessed stated: ‘‘The reporting of any significant significant. by the agency in determining what loss of drug samples is critical to the The agency agrees with the first constitutes a significant loss. The success of diversion control. * * * FDA comment that different methods for comment recommended that FDA intends this requirement to mean that determining whether a loss is significant clarify within proposed § 203.37 that it the agency is to be advised of actual, may be used depending on the type of would not challenge a manufacturer for physical losses, but not insignificant loss involved. For single loss events following its own definition of accounting mistakes.’’ FDA stated that it (i.e., ‘‘physical’’ losses) including losses significant loss. was aware of the difficulty of by representatives (except for losses The agency declines to revise the establishing a threshold for significant reported as thefts, which must all be proposal to state that it will not

VerDate 29-OCT-99 09:33 Dec 02, 1999 Jkt 190000 PO 00000 Frm 00049 Fmt 4700 Sfmt 4700 E:\FR\FM\A03DE0.001 pfrm02 PsN: 03DER1 67742 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations challenge a manufacturer for following requests for drug sample information by accordance with section 201(k) of the its own definition of significant loss. FDA and Federal, State, and local act. However, the agency advises that a firm regulatory and law enforcement b. Section 203.38(c). Proposed can best ensure that no enforcement officials. § 203.38(c) stated, in relevant part, that action will be taken against it for ‘‘each sample unit shall bear a label that 8. Sample Lot or Control Numbers; violation of § 203.37(b) where it clearly denotes its status as a drug Labeling of Sample Units establishes a system for reporting and sample, e.g., ‘sample,’ ‘not for sale,’ investigating significant losses that is a. Section 203.38(a). Proposed ‘professional courtesy package.’’’ consistent with the guidance provided § 203.38(a) stated: ‘‘The manufacturer or In the preamble to the proposed rule in this notice and in the proposed rule. authorized distributor of record of a (59 FR 11842 at 11855), the agency Additionally, where a manufacturer or drug sample shall include in the identified ‘‘starter packs’’ as distributor is unsure about whether a labeling of the drug sample and the prescription drug products distributed loss is significant, it should report and label of the sample unit an identifying without charge by manufacturers or investigate the loss as if it were lot or control number that will permit distributors to pharmacists with the significant. the tracking of the distribution of each intent that pharmacists place the drugs 64. One comment stated that FDA drug sample unit.’’ in stock and sell them at retail. The should not give manufacturers or 67. Two comments stated that the agency stated that starter packs are distributors any discretion to define statement ‘‘identifying lot or control intended for sale and therefore do not what constitutes significant loss, but number that will permit the tracking of meet the statutory definition of a drug rather should define it for them. the distribution of each drug sample sample. Since the publication of the As explained previously and in the unit’’ could be interpreted to mean that proposed regulations, the agency has proposal (59 FR 11842 at 11851), the each drug sample unit would require its become aware of the use of the terms threshold level of what constitutes a own identifying number. The comments ‘‘starter,’’ ‘‘starter samples,’’ and significant loss will necessarily vary requested that the agency clarify that ‘‘patient starter pack’’ to refer to drug depending on such factors as the size of tracking is required only of lots, not of sample units. Because the agency does a company and the value of its total sample units. not consider starter packs (as described inventory, the accuracy of a FDA clarifies that the section is previously) to be drug samples, the use manufacturer’s or distributor’s system intended to require only the tracking of of the term ‘‘starter’’ on drug sample for tracking sample distribution, and the sample units by the lot from which they labeling is inappropriate and should not circumstances surrounding the loss. came, and does not require that each be used. Thus, the agency declines to codify a sample unit receive its own identifying 69. One comment stated that the definition of significant loss. 65. One comment expressed concern number. proposed requirement goes beyond the that virtually all losses would have to be 68. Several comments requested intent of Congress in PDMA and that it reported under the significant loss clarification on whether the lot or would not deter diversion because the standard as described by the agency in control number is required to appear contents may be removed from the drug the proposal and recommended that only on the external packaging of package. significant loss be defined as a sample units or on all labeling as Designating a sample unit as a sample percentage of total sales or supplies. defined in 21 CFR part 201, including is the only way to distinguish drug The agency believes that it has inserts and circulars. Several comments products manufactured for sale from provided sufficient guidance in the objected to the latter interpretation on drug samples. Because Congress proposed rule and in this notice about the grounds that such a requirement prohibited the sale, purchase, or trade of how to distinguish between routine would be costly and would not aid in drug samples, or the distribution of losses and significant losses that need to the prevention of drug diversion. One samples in a manner that is inconsistent be reported and investigated. Thus, the comment, for example, stated that with section 503 of the act, the agency disagrees that all or virtually all package inserts would probably be requirement clearly is consistent with losses will have to be reported and discarded by individuals engaged in and furthers legislative intent. Although investigated and declines to set a diversion. Several comments stated that the requirement does not provide a threshold based on percentage of total inserts are currently not lot-specific and foolproof method of preventing sales or supplies above which a loss will that customizing inserts to lots would be diversion, the requirement will help be considered significant. extremely expensive. One comment deter sample diversion by denying c. Section 203.37(d). Proposed stated that requiring lot numbers on diverters a market-ready product. § 203.37(d) stated: ‘‘* * * A package inserts would not benefit recall 70. One comment recommended, as manufacturer or authorized distributor procedures. an alternative to isolating a of record that distributes drug samples The section as proposed would manufacturing run of labels, that shall inform FDA in writing within 30 require lot or control numbers to appear manufacturers be permitted to use days of selecting the individual both on sample unit labels and on other adhesive stickers that could be placed responsible for responding to a request drug sample labeling. Inserts and on the outside containers of sample for information about drug samples of circulars are labeling as defined in units otherwise labeled for retail. that individual’s name, business section 201(m) of the act. However, the The agency will not object to the use address, and telephone number.’’ agency agrees with the comments that of stickers provided that a sticker is 66. One comment sought clarification requiring lot or control numbers to applied to both the label of the sample on whether the information required by appear on package inserts, circulars, or unit and the outside container or this section is ‘‘for a regulatory agency similar labeling is not necessary. The packaging of the sample unit, if any, in and PDMA information or information section has been revised to require that accordance with § 203.38(a). However, for a potential customer-doctor or the lot or control number appear only to avoid giving diverters a market-ready patient.’’ on the label of the sample unit itself, product, any stickers should be difficult FDA clarifies that the information and on the outside container or to remove and their removal should be required by this section is to facilitate packaging of the sample unit, if any, in evident. The agency recommends more

VerDate 29-OCT-99 09:33 Dec 02, 1999 Jkt 190000 PO 00000 Frm 00050 Fmt 4700 Sfmt 4700 E:\FR\FM\A03DE0.001 pfrm02 PsN: 03DER1 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations 67743 durable methods of identifying a sample and verification of the distribution and Federal agency, lacks the authority to product, such as overprinting. use of these products. Therefore, such shift the burden of proof in an 71. Several comments opposed the drugs would ordinarily not be required enforcement proceeding. requirement in proposed § 203.38(c) on to be labeled in accordance with The agency has decided to withdraw the grounds that it would entail too § 203.38(c). Moreover, even where drugs proposed § 203.40 from the final rule. much expense. are distributed for a promotional However, the agency continues to It is the agency’s experience that the purpose and § 203.38(c) applies, the interpret the act to prohibit the packaging of sample units currently agency does not believe, for the reasons distribution of drug samples by a used by the majority of manufacturers discussed in response to comment 71, manufacturer or distributor to a retail already identifies the units as samples that the labeling requirement will pharmacy and the receipt of a drug through the use of terminology such as impose a financial burden large enough sample by a retail pharmacy from any ‘‘not for sale’’ or ‘‘professional use to affect the ability of manufacturers to person. Moreover, the agency believes only.’’ Such wording meets the intent of provide drugs free of charge to indigent that the presence of drug samples in a this section. Moreover, as discussed patients. retail pharmacy is probative that under the previous comment, 74. One comment requested a 3- samples are being sold, purchased, manufacturers may place an adhesive month grace period after the effective traded, or distributed in violation of the sticker on the label of a retail unit and date of the regulations in which act. Therefore, the agency may on the outside container or package of nonlabeled sample units already in the investigate the presence of drug samples the unit, if any, designating the retail possession of manufacturers could be in a retail pharmacy to determine if unit as a sample. Therefore, the agency used. other violations warranting enforcement is unconvinced that this requirement As discussed in section II.K of this action exist. would impose a financial hardship on document, the agency has determined 77. Three comments objected to the the majority of manufacturers. that the provisions in the final rule will prohibition on the distribution of drug 72. One comment objected to the not become effective until 1 year after samples to or the receipt of drug proposed rule as it relates to the the date of publication of the final rule samples by retail pharmacies. Two distribution of radiopharmaceutical in the Federal Register. Thus, the comments stated that the prohibition samples. The comment stated that agency believes that manufacturers and would prevent pharmacists from prohibiting manufacturers from authorized distributors will have ample providing drug counseling to patients. supplying radiopharmaceutical samples time from the publication of the final One comment stated that counseling is in retail packages would be unduly rule to its effective date to come into important because physicians are not burdensome because of the small compliance. accustomed to counseling patients to numbers of such samples that are 75. One comment recommended that whom they give drugs. Another distributed. The comment the proposed regulation be rewritten to comment asserted that pharmacist- recommended that require that a drug sample label include patient counseling improves compliance radiopharmaceuticals be exempt from the terms ‘‘sample’’ or ‘‘professional with drug therapy and reduces overall the requirement. sample’’ and to allow, in addition to health care costs. Two comments stated As discussed previously, these terms, such terms as ‘‘not for sale’’ that retail pharmacies should be manufacturers may place an adhesive or ‘‘professional courtesy package.’’ allowed to store and dispense samples sticker on the label of a retail unit and The wording used in proposed at the direction of a physician because on the outside container or package of § 203.38(c) was intended to be pharmacies are designed for drug the unit, if any, designating it as a illustrative only. Any words that clearly storage and physicians’ offices are not. sample. The agency believes that this is designate a sample unit as a sample may The agency recognizes that proper sufficient to address the concerns raised be used. As discussed previously, the storage and handling of prescription by the comment and declines to create term ‘‘starter’’ does not designate a drugs and adequate counseling in the requested exemption. sample unit as a sample, and should not connection with prescription drug use 73. One comment stated that the be used. are important concerns. However, the increased costs associated with the agency believes that both of these goals labeling requirement would affect the 9. Retail Pharmacies and Drug Samples can and must be accomplished within ability of manufacturers to provide In the preamble to the proposal (59 FR the system of sample distribution drugs free of charge to indigent patients. 11842 at 11853), the agency explained established by Congress in PDMA. As As discussed in the proposal (59 FR that by limiting the distribution of discussed previously, under this system, 11842 at 11855), there are some samples to licensed practitioners and to drug samples may not be distributed to circumstances in which prescription hospitals or health care entity retail pharmacies and retail pharmacies drugs that are provided free of charge pharmacies at the request of a licensed may not receive such samples. will not be considered samples under practitioner, but not to retail 78. One comment objected to the fact section 503(c)(1) of the act and pharmacies, Congress clearly expressed that physicians are not permitted to give § 203.3(i). The example given was of its intent to not allow the distribution of samples to or to request that samples be prescription drugs provided at no samples to retail pharmacies. Under sent to a retail pharmacy, although they charge to licensed practitioners for the proposed § 203.40, the presence in a are expressly permitted to request that treatment of indigent patients where the retail pharmacy of any drug sample samples be sent to hospital or health main object is to ensure that patients in would have been considered evidence care entity pharmacies. The comment need of prescription drugs have access that the drug sample was obtained by argued that, except in two States, all to them (whatever their financial the retail pharmacy in violation of pharmacists receive the same type of circumstances) and not to promote the section 503(c)(1) of the act. license regardless of practice setting. drugs. According to information 76. One comment opposed proposed The comment also stated that all available to the agency, these § 203.40, stating that ‘‘there is no pharmacists, regardless of practice manufacturer-sponsored indigent statutory or evidentiary basis for setting, independently dispense drugs to patient programs generally include creating this presumption.’’ The patients in accordance with a written appropriate controls, documentation, comment also stated that FDA, as a prescription. The comment

VerDate 29-OCT-99 09:33 Dec 02, 1999 Jkt 190000 PO 00000 Frm 00051 Fmt 4700 Sfmt 4700 E:\FR\FM\A03DE0.001 pfrm02 PsN: 03DER1 67744 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations recommended either that all types of manufacturers for this purpose. to them. The agency cautioned, pharmacies should be permitted to According to the comment, allowing however, that because starter packs receive samples at the direction of a manufacturers to retrieve samples for provide opportunities for diversion licensed practitioner or none should be testing would further the purposes of similar to those presented by drug permitted. PDMA legislation by ensuring that drug samples, manufacturers and distributors The agency declines to follow the samples in the possession of licensed should establish and maintain recommendation of the comment. practitioners are safe and effective. The accounting, audit, and security systems PDMA expressly provided that hospital comment stated that, under the for starter packs to guard against or health care entity pharmacies may proposed rule, there are no regulatory diversion. provide drug samples to patients at the controls on the handling and storage of 81. One comment supported the direction of a licensed practitioner. drugs in the possession of licensed agency’s position on starter packs, Moreover, PDMA provided that practitioners. The comment stated that stating: ‘‘We applaud the FDA for manufacturers and authorized by obtaining and analyzing drug clearing up misunderstandings about distributors of record may distribute samples that have been stored in the difference between samples and drug samples to hospital or health care practitioners’ offices under actual starter packs.’’ Another comment agreed entity pharmacies at the request of a conditions of use, manufacturers will be with the agency’s position, but stated licensed practitioner. Thus, Congress able to improve packaging design to that the cautionary language used by the clearly expressed its intent to allow ensure the stability of drug samples. The agency in connection with starter packs hospital or health care entity comment also stated that allowing implicitly regulates them as samples. pharmacies to receive and dispense manufacturers to obtain and analyze The comment recommended that the drug samples. No such intent is evident samples ‘‘raises minimal, if not proposed regulations be revised to with respect to retail pharmacies. nonexistent, risk of samples being include a definition of starter pack 79. One comment stated that not diverted into secondary commerce.’’ indicating that it is not a sample and to permitting retail pharmacies to store As stated in the proposal, the agency’s allow manufacturers to decide how to and to dispense samples at the direction policy is to permit licensed practitioners monitor the distribution of starter packs. of a physician is inconsistent with to return drug samples to the As noted previously, the agency has agency policy, as expressed in the manufacturer or distributor from which concluded that starter packs do not meet preamble to the proposal, allowing they were obtained. Although the the statutory definition of a drug sample distribution of prescription drugs agency had originally only considered and thus are not subject to PDMA through retail pharmacies to indigent the scenario in which the licensed requirements for sample distribution. patients. practitioner would initiate such returns, This determination is consistent with The proposal (59 FR 11842 at 11855) the agency clarifies that a request by a the definition of ‘‘drug sample’’ in the did not address dispensing prescription manufacturer to a practitioner for return act and final regulations and need not drugs to indigent patients through retail of its own samples for stability testing be codified. The agency also clarifies pharmacies. It discussed the or other analysis would be permissible. circumstances whereby manufacturers The agency does not believe, that manufacturers are not required to make arrangements to provide however, that it is permissible under follow the agency’s recommendations prescription drugs to licensed PDMA for licensed practitioners to for monitoring the distribution of starter practitioners to prescribe and dispense distribute drug samples to packs. However, because of the at no cost or at reduced cost to indigent manufacturers or authorized distributors potential for diversion of these patients of those practitioners. As who did not supply them. The agency products, the agency continues to previously stated, such drugs will believes that such distribution would recommend that their distribution be ordinarily not be considered samples. serve no legitimate purpose and would monitored in a manner designed to Therefore, a licensed practitioner may unnecessarily increase the risk of prevent and detect diversion. direct such drugs to be distributed to sample diversion. The agency is not 82. One comment sought clarification and dispensed by a retail pharmacy. persuaded that manufacturers would of whether specific distributions of expend the time and resources prescription drugs to indigent patients 10. Permissible Uses of Drug Samples by necessary to perform stability and through retail pharmacies would Licensed Practitioners quality testing on other manufacturers’ constitute a sample or nonsample In the preamble to the proposal (59 FR samples. Moreover, even if such testing transaction. In the scenario presented by 11842 at 11852), the agency described were performed, it is unlikely that the the comment, the patient would present the permissible uses of drug samples by results of such testing would be shared a prescription and a ‘‘prescription drug licensed practitioners by stating: with the manufacturer of the sample. card’’ to the retail pharmacist, who FDA advises that PDMA and this proposed Thus, the sample quality would not be would fill the prescription from a stock rule would permit a licensed practitioner to: improved by allowing manufacturers to bottle and be reimbursed for the cost of (1) Dispense the drug sample as set forth in retrieve other manufacturers’ samples. the drug and patient counseling services section 503(d)(1) of the act; (2) donate the through a ‘‘pharmacy benefits drug sample to a charitable institution as Finally, the agency believes that a risk provided for in proposed § 203.39; (3) return of diversion does exist with such company.’’ The comment stated that the the drug sample to the manufacturer or distribution and that the risk is not manufacturer would have a contract distributor; or (4) destroy the drug sample. offset by any appreciable health benefit. with the pharmacy benefits company to 80. One comment requested that the handle all transactions for a drug under proposed rule be revised to permit a 11. Drug Sample Status of Free the manufacturer’s indigent drug licensed practitioner to give drug Distributions program. samples to a requesting manufacturer In the preamble to the proposed rule The agency advises that the for stability testing and other quality (59 FR 11842 at 11855), the agency prescription drug dispensed in the testing. The comment stated that a stated that because starter packs are scenario presented by the comment manufacturer should be allowed to intended to be sold, they are not would not be considered a sample for request and retrieve both its own samples and thus the sample purposes of PDMA because the drug samples and the samples of other distribution requirements do not apply product comes from the stock of the

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According to the distributions of bulk drug substances to Therefore, the agency is no longer comment, such drugs should not be conduct stability, validation, or recommending that the sample considered samples because they are not characterization studies, or for other distribution requirements in PDMA and intended to promote the drug. purposes related to testing and the final rule be followed for bid and The agency believes that distributions evaluation of the bulk drug substance. commercial samples. However, because of free prescription drugs to a physician Such distributions would also include the potential for diversion exists, the for use by his family do constitute the free distribution of a limited agency recommends that manufacturers samples because they are intended to quantity of a finished dosage form to a and distributors monitor their bid and promote the marketing of a drug. A repackager for testing with the commercial sample distribution to licensed practitioner is clearly repackager’s packaging equipment. As prevent and detect diversion. benefitted by the provision of free drugs discussed in comment 85, the agency F. Application of PDMA to Bulk for personal or family use. The agency has determined that distributions of bid Pharmaceutical Chemicals believes that the benefit conferred on a and commercial samples are not subject practitioner in this manner by a to requirements for sample distribution In the preamble to the proposal (59 FR manufacturer or authorized distributor under PDMA or the final rule. 11842 at 11843), the agency concluded is clearly intended to influence the 85. Several comments objected to that bulk drug substances that are physician’s decisionmaking process subjecting bid and commercial samples subject to section 503(b) of the act (i.e., about what drugs to prescribe for to the same requirements as prescription prescription) are covered under PDMA. patients in the future and is therefore drug samples on the grounds that bid 86. One comment objected to the intended to promote the sale of the and commercial samples are not application of any portion of PDMA, drug. intended to promote the sale of a drug including the sample distribution requirements and wholesale distribution 12. Bid and Commercial Samples and thus are not drug samples. Two comments stated that adhering to drug requirements, to bulk pharmaceutical In the preamble to the proposal (59 FR sample distribution requirements for bid chemicals (BPC’s). The comment argued 11842 at 11856), the agency discussed and commercial samples would be that PDMA was intended by Congress to ‘‘bid’’ and ‘‘commercial’’ samples. The burdensome to small companies and apply to finished dosage forms only and agency stated that these include drug manufacturers such as repackers that the proposed regulations cannot be specimens of bulk drug ingredients, that do not have licensed practitioners practically applied to BPC’s. The precursor specimens, or finished dosage on their staff. One of these comments comment stated that the legislative forms that are distributed to a stated that the burden would not be history of PDMA indicates that Congress manufacturer in limited quantities for offset by any appreciable public health was concerned with the effects of testing and evaluation purposes. As benefit. Several comments stated that diversion on consumers and that, since noted by the agency, specimens of bulk the likelihood of diversion of BPC’s are not sold to consumers, drug ingredients may be used by commercial or bid samples is extremely Congress did not intend for the act to manufacturers to determine whether the small. Another comment stated that the apply to them. The comment also stated bulk drug is compatible with the potential for diversion of bid and that BPC’s were not mentioned by manufacturer’s production equipment commercial samples asserted by the Congress in either PDMA or its or suitable for use in formulating drug agency is unsupported in either the legislative history and the absence of products. Finished dosage forms may be congressional or administrative record. legislative reference to BPC’s indicates used by repackers to determine if they Several comments recommended that Congress did not even consider are suitable for use with various applying existing recordkeeping including BPC’s under PDMA. The packaging materials and equipment. requirements for prescription drugs to comment argued that this reasoning is Citing the definition of drug sample in bid and commercial samples. consistent with the agency’s decision to section 503(c)(1) of the act and proposed Although bid and commercial exclude blood and blood components § 203.3(i), the agency stated that, samples arguably meet the literal from wholesale distribution because of the statutory language and definition of a drug sample under requirements in PDMA. the threat of diversion, persons who section 503(c)(1) of the act, the agency The comment also said that the distribute bid or commercial samples believes that application of the statutory proposed regulations dealing with should follow the requirements for requirements for drug sample wholesale distribution and drug sample distribution set forth in the act distribution to such drugs would be samples cannot be practically applied to and the proposal. inconsistent with congressional intent. BPC’s. The comment stated, for 84. One comment asked if the agency In PDMA’s legislative history, Congress example, that the proposed sample intended for manufacturers providing stated that ‘‘pharmaceutical regulations would not allow a BPC materials for stability trials or for manufacturers and distributors have a manufacturer to furnish a finished validation studies to follow sample long-established practice of providing dosage form manufacturer with BPC distribution requirements. The comment samples of their prescription drugs to samples because a manufacturer is also sought guidance on which physicians and other practitioners prohibited from distributing drug distributions of prescription drugs licensed to prescribe such drugs who, in samples to anyone other than a licensed would be covered by the terms ‘‘bid’’ turn, provide them to their patients. The practitioner or a hospital or health care and ‘‘commercial’’ samples. ostensible purpose is to acquaint the entity pharmacy designated by a The agency clarifies that the terms practitioner with the therapeutic value licensed practitioner. The comment said ‘‘bid’’ and ‘‘commercial’’ samples, as of the medication and thus encourage that BPC manufacturers could not used by the agency in the proposal and the written prescription of the drug.’’ comply with wholesale licensing in the final rule, refer to distributions of (See H. Rept. 100–76 at p. 12.) Because requirements in part 205 because BPC’s

VerDate 29-OCT-99 09:33 Dec 02, 1999 Jkt 190000 PO 00000 Frm 00053 Fmt 4700 Sfmt 4700 E:\FR\FM\A03DE0.001 pfrm02 PsN: 03DER1 67746 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations are distributed in an entirely different necessarily falls within the scope of interstate commerce must be licensed by way than other prescription drugs. The section 503(b)(1) of the act. Thus, on its the State from which the distribution comment recommended that if BPC’s face PDMA applies to prescription occurs. For domestically manufactured are to be included under PDMA, the BDS’s. Although Congress did not prescription BDS’s, the BDS proposed regulations should be revised specifically refer to BDS’s in the manufacturer must be licensed by the to ‘‘include regulations specific to and legislative history of PDMA, it also did State where its facilities are located. appropriate to BPC’s that address the not specifically refer to finished dosage Agents that subsequently distribute the problems of diversion and forms or otherwise indicate that the prescription BDS must be licensed by counterfeiting.’’ scope of PDMA is limited to finished the State from which the distribution of The preamble to the proposed dosage forms. Moreover, the agency the BDS occurs. regulations (59 FR 11843) discussed the disagrees with the assertion that because In addition, any agent or distributor applicability of PDMA not to BPC’s, but prescription BDS’s are not sold to that is not an authorized distributor of to bulk drug substances (BDS’s). As consumers Congress did not intend for record must provide a statement of discussed in section II of this document, PDMA to apply to them. Prescription origin before distributing the BDS. Thus, the definition of bulk drug substance BDS’s are used as components of except for those prescription BDS used in the final rule includes only prescription drug products that are sold distributors that have a written those substances that become active to consumers, and clearly any practices agreement with the BDS manufacturer ingredients when used in the that adversely impact upon the quality to distribute the manufacturer’s manufacturing, processing, or packaging of prescription BDS’s could ultimately products for a period of time or for a of a drug. It is the agency’s harm consumers. Thus, the agency number of shipments, prescription BDS understanding that the term BPC, as believes that PDMA was intended by distributors must provide a statement of used in the comment, includes Congress to apply to prescription BDS’s. origin showing all prior sales and substances that do not become active The agency also believes that the purchases of the prescription BDS being ingredients when used in the wholesale distribution provisions of distributed and the names and manufacturing, processing, or packaging PDMA should and must be applied to addresses of the parties to such of a drug (i.e., substances that are not prescription BDS’s. Prescription BDS’s transactions. Under § 203.50(c) of the pharmacologically active, do not furnish are distributed from the manufacturer of final rule, a manufacturer that subjects direct effect in the diagnosis, cure, the BDS to the manufacturer or a prescription BDS to any additional mitigation, treatment, or prevention of compounder of the finished dosage form manufacturing processes to produce a disease, and do not affect the structure of the drug. That process of distribution different drug is not required to provide or any function of the body of humans) may be direct or, as is generally the case to a purchaser a drug origin statement. and thus are not bulk drug substances. for prescription BDS’s manufactured by The statutory language of PDMA a foreign manufacturer, through one or G. Application of PDMA to makes it applicable to all drugs (as more brokers/wholesalers. This system Radiopharmaceuticals defined under section 201(g)(1) of the of distribution meets the definition of act) that are subject to section 503(b)(1) wholesale distribution under section 87. One comment requested that of the act. Although components of 503(e)(4)(B) of the act. Moreover, distributions of radiopharmaceuticals be finished drug products that are not bulk because this system of distribution may exempt from the definition of wholesale drug substances may meet the statutory involve several transfers of the bulk distribution in proposed § 203.3(y) and definition of a drug under section drug substance through numerous part 205 such that State licensing and 201(g)(1)(D) of the act, such materials parties and facilities over varying drug origin statement requirements are not prescription drugs as described periods of time, similar concerns exist would be inapplicable to these drugs. under section 503(b)(1) of the act. with BDS’s as with finished dosage The comment made the following points Accordingly, non-BDS components of forms regarding the personnel and about radiopharmaceuticals: (1) finished drug products are not subject to facilities through which BDS’s are Radiopharmaceuticals differ from other PDMA requirements (e.g., drug sample distributed and the manner in which prescription drugs in that their or wholesale drug distribution). In they are stored and handled. radioactive component causes them to addition, as discussed under the Accordingly, manufacturers and lose clinical effectiveness within a few preceding comment, the drug sample distributors of prescription BDS’s that days of manufacture; (2) distribution requirements of PDMA do engage in wholesale distribution of radiopharmaceuticals are prepared in not apply to specimens of BDS’s these substances are required, under small quantities, shipped overnight, and provided to finished dosage form section 503(e)(2)(A) of the act and part used the same day they are received; (3) manufacturers for testing and evaluation 205, to be State licensed wholesale neither manufacturers nor retailers can purposes. distributors and to meet other have inventory of these drugs for longer The agency disagrees, however, that requirements for wholesale distribution than a couple of days; (4) the unique PDMA was not intended by Congress to of prescription drugs under PDMA and properties of radiopharmaceuticals apply to prescription BDS’s or that the the agency’s regulations. make many of the storage, handling, and distribution of prescription BDS’s is so Thus, for prescription BDS’s imported accountability considerations of part different than that of finished dosage into the United States, including BDS’s 205 inapplicable; (5) regulation by FDA forms that the wholesale distribution intended for pharmacy compounding, would be inappropriate and was not requirements of PDMA cannot be the person responsible for the intended by Congress because it would practically applied to BDS’s. As noted importation of such BDS is engaged in duplicate existing regulations by several previously, the statutory language of the wholesale distribution of a Federal, State, and local agencies; (6) PDMA makes it applicable to all drugs prescription drug and must be State existing regulations cover how subject to section 503(b)(1) of the act. A licensed in the State into which the radiopharmaceuticals are manufactured, BDS that is intended to furnish prescription BDS is imported and from packaged, labeled, stored, shipped, pharmacological activity or other direct which distribution of such BDS occurs. used, and controlled; and (7) effect when it becomes a finished In addition, any agent or wholesaler that radiopharmacies are licensed under dosage form that is a prescription drug subsequently distributes the BDS in State retail pharmacy laws that impose

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The term radioactive drugs, sales, purchases, or trades of the drug, source codes may not be used on the as defined under 21 CFR 310.3(n), starting with the manufacturer, even in drug pedigree as a substitute for encompasses both radioactive and cases where the seller from whom the required information. nonradioactive drug products. distributor received the drug was an One comment supported the agency’s Radioactive drugs include drug authorized distributor of record and did position on the use of coding. The products derived from by-product not provide any pedigree for the drug. comment stated that the practice of materials from nuclear reactors (i.e., The comment stated that ‘‘the proposed using codes places a large burden on radionuclide generators), cyclotron- regulation would make it impossible, as distributors and recommended that the produced products (i.e., Ga-67 Citrate, a practical matter, for authorized agency go a step further and revise the Tl-201 Chloride, and In-111 Oxide), and distributors to sell into the proposed regulations to prohibit the use positron emission tomography products [prescription] specialty market without of product source codes on drug origin (e.g., Rubidium-82 and providing a pedigree,’’ which was not statements. fludeoxyglucose). Nonradioactive intended by Congress. The comment The agency believes that its position reagent kits are also radioactive drugs recommended revising the proposed against the use of product source codes and are compounded with radioactive rule to require that the drug origin as a substitute for the name and address substances by radiopharmacies or statement (i.e., the ‘‘pedigree’’) only go of buyers or sellers in drug origin hospitals to make the final drug back to the last authorized distributor of statements was adequately addressed in product. record. the preamble to the proposal and As the comment points out, most The agency declines to revise the restated here. Accordingly, the agency radioactive drugs have a limited shelf- proposal in the manner suggested by the declines to codify a prohibition on the life which requires that they be comment. Section 503(e)(1)(A) of the act use of such codes in the final regulation. distributed in a different manner than requires that, prior to completion of a many prescription drugs. In addition, wholesale distribution of a prescription 2. Section 203.50(b) certain Federal and various State drug by a person who is not the The agency has added § 203.50(b) to manufacturer or an authorized requirements for shipping, storage, clarify that the drug origin statement is distributor of the drug, a statement must handling, and recordkeeping apply to subject to the revised record retention be provided to the recipient identifying radioactive drugs. However, as requirements of § 203.60(d) and must be each prior sale, purchase, or trade of the discussed previously in conjunction retained by all wholesale distributors drug, including the date of the with medical gases and the comments involved in the distribution of the drug transaction and the names and on bulk drugs, PDMA applies to all product, whether authorized or addresses of all parties to the prescription drugs. Therefore, unless unauthorized, for 3 years. The agency is transaction. There is no indication in there is a clear indication in PDMA or providing this clarification in response PDMA that Congress intended that the its legislative history that Congress did to numerous inquiries that it has statement include only those sales, not intend for PDMA to apply to a received since the proposed rule was specific class of drugs, the agency does purchases, or trades since the drug was last handled by an authorized published. not believe that it is appropriate to distributor. Thus, an unauthorized exempt the class from PDMA 3. Section 203.50(c) distributor is required to provide a full requirements and restrictions. Except drug origin statement in accordance Proposed § 203.50(c) stated: ‘‘Each for the factors mentioned above, there is with PDMA and the final rule whether manufacturer shall maintain at the no indication in PDMA or its legislative or not it has purchased a prescription corporate offices a current written list of history that Congress intended that drug from an authorized distributor of all authorized distributors of record.’’ radioactive drugs be treated differently record. Although the agency encourages Proposed § 203.50(c)(3) stated: ‘‘Each than other types of prescription drug authorized distributors to provide a manufacturer shall make its list of products. The agency does not believe drug origin statement to unauthorized authorized distributors of record that these factors, by themselves, distributors, they are not required to do available on request to the public for indicate a clear congressional intent to so under PDMA or the final rule. inspection or copying. A manufacturer exempt radioactive drugs from PDMA or 89. In the preamble to the proposal may impose reasonable copying charges to exclude radioactive drugs from (59 FR 11842 at 11856 and 11857), the for such requests from members of the specific PDMA requirements. agency discussed at length its views on public.’’ H. Wholesale Distribution the use of coding that represents 90. One comment recommended that required information on the drug origin the list of distributors could be 1. Section 203.50(a) and (a)(6) statement. The agency stated that, since maintained at any company site and Proposed § 203.50(a) and (a)(6) stated: the enactment of PDMA, FDA’s position could be made available via electronic * * * Before the completion of any has been that the use of coded media or within 24 hours to other sites. wholesale distribution by a wholesale statements on the drug origin statement The rule does not require company distributor of a prescription drug for which that make information unintelligible to records to be kept at every company the seller is not an authorized distributor of purchasers without the intervention of a site. As long as a company can produce record to another wholesale distributor or third party to decipher the code (e.g., the required information for review and retail pharmacy, the seller shall provide to ‘‘this shipment of drugs came from copying by FDA or other Federal, State, the purchaser a statement identifying each prior sale, purchase, or trade of such drug. unauthorized distributor RS47GS2273’’) or local law enforcement agencies at the This identifying statement shall include: does not provide purchasers with the site where they are requested within 2 * * * The business name and address of all information that Congress intended that business days, the company may parties to each prior transaction involving the they receive. Moreover, the PDA, which maintain its records at a central drug, starting with the manufacturer * * *. amended section 503(e)(1) of the act to location.

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91. Several comments objected to the comply with revised § 203.50(d)(3) otherwise be able to easily obtain drugs proposed requirement that should be reimbursed. for office use. Thus, the exemption was manufacturers must make their list of not created to confer a special benefit on 4. Sales to Licensed Practitioners by authorized distributors of record retail pharmacies, but to meet the Retail Pharmacies available to the public. The comments legitimate needs of licensed stated that this information is In the preamble to the proposal (59 FR practitioners. The agency believes that proprietary in nature and should be kept 11842 at 11858), the agency stated: the 20 percent threshold recommended confidential. One comment stated that FDA believes that permitting the sale of by the comment is inconsistent with the FDA has acknowledged that this small quantities of prescription drugs by purpose of the exemption and declines retail pharmacies to licensed practitioners for information was considered proprietary office use without the requirement of a State to follow the recommendation. The in the past. wholesale distributor’s license satisfies a agency notes that a retail pharmacy is Other comments stated that providing legitimate need and is consistent with the not precluded from making more than 5 such information is unduly burdensome intent of the statute. Accordingly, the agency percent of its annual sales to licensed on manufacturers. One comment has included language in proposed § 203.3(y) practitioners. It must, however, obtain a recommended adding a ‘‘reasonable that would exclude the sale of minimal State wholesale distributor license to do hours of inspection and reasonable quantities of drugs by retail pharmacies to so. licensed practitioners for office use from the copying charges’’ provision to the definition of ‘‘wholesale distribution.’’ I. Request and Receipt Forms, Reports, section. Another comment In this context, sales of prescription drugs and Records recommended revising the section to by a retail pharmacy to licensed practitioners require only that industry respond to for office use will be considered to be 1. Section 203.60(e)(1) individual inquiries about whether a minimal if the total annual dollar volume of specific wholesaler is an authorized prescription drugs sold to licensed Proposed § 203.60(e)(1) stated: ‘‘Any distributor of record. practitioners does not exceed 5 percent of the person required to create or maintain The requirement that manufacturers dollar volume of that retail pharmacy’s reports, lists, or other records under annual prescription drug sales. PDMA, PDA, or this part shall retain maintain a current list of authorized 92. One comment supported the distributors of record appears at section them for at least 3 years after the date agency’s decision to exclude minimal of their creation.’’ 503(e)(1)(B) of the act. In the legislative sales of prescription drugs by retail 94. One comment objected to the history, Congress stated that this list pharmacies from the definition of proposed requirement in § 203.60(e)(1), must be made available for public wholesale distribution and stating that it conflicts with the 2-year inspection. (See S. Rept. 100–303, p. 7.) recommended that the 5 percent retention period requirement under Thus, the agency believes that denying threshold be codified in the final § 205.50(f)(2). The comment said that public access to lists of authorized regulation under § 203.3(y)(11). distributors maintained by The agency believes that its position changing the record retention time in manufacturers would contradict on what constitutes a minimal amount the manner proposed would ‘‘require 44 Congress’ clearly expressed intent. of prescription drugs for the purposes of states that adopted FDA’s 2-year In addition, the agency disagrees that revised § 203.3(cc)(10) was adequately standard to enact legislative and/or a manufacturer’s list of authorized explained in the preamble to the regulatory changes in order to have distributors constitutes proprietary or proposal and need not be codified. licensing programs that meet the confidential information. No provision 93. Another comment recommended minimum federal requirements.’’ The of PDMA or the act designates such that the 5 percent threshold be comment also said that changing to a 3- information as proprietary, and the increased to 20 percent and should be year record retention period would agency is unaware of other laws or based on annual, not monthly or serve no apparent public health regulations that designate such weekly, sales of a retail pharmacy. purpose, citing the agency’s rationale information as proprietary. Moreover, According to the comment, the 5 behind the 2-year requirement in the the agency has not previously stated percent threshold would disadvantage preamble to the final rule on State that this information is proprietary. In small, independent pharmacies because wholesale licensing guidelines. The fact, in a 1988 letter to regulated a large percentage of their sales is comment recommended that the industry (see Letter from Daniel L. derived from supplying local proposed section should be revised to Michels, Director, Office of Compliance practitioners with prescription drugs. require record retention for 2 years for to Regulated Industry, Docket No. 88N– The comment also said that the 5 all records kept by prescription drug 258L, August 1, 1988), the agency percent threshold could be reached wholesalers under PDMA. specifically requested that easily by a pharmacy that supplies Section 205.50(f)(1) requires that manufacturers make lists of authorized expensive drugs, such as chemotherapy inventories and records of transactions distributors available at reasonable medications, to practitioners. regarding the receipt and distribution or charge to any requesting person. The distribution of prescription drugs other disposition of prescription drugs Finally, the final rule permits to practitioners for office use constitutes be created and maintained. Section manufacturers to impose reasonable wholesale distribution under section 205.50(f)(2) requires that such records copying charges for requests. Such 503(e) of the act and proposed § 203.3(y) be ‘‘made available’’ to authorized charges could include clerical time used (i.e., distribution to other than a Federal, State, or local law enforcement to create copies, copying costs, and consumer or patient). The agency agencies for a period of 2 years mailing costs, if the requested copies are excluded the sale of minimal quantities following the disposition of the drugs to mailed. Therefore, except for costs of drugs by retail pharmacies to licensed which the record relates. Because the associated with creating, updating, and practitioners for office use from the requirement under proposed maintaining the authorized distributors definition of wholesale distribution to § 203.60(e)(1) that records be retained lists themselves (a cost that has been meet the needs of licensed practitioners for 3 years after the creation of the evaluated separately by the agency in who may not purchase enough record would apply to records required the ‘‘Paperwork Reduction Act of 1995’’ prescription drugs to go through a by § 205.50(f)(1), the requirements could section under § 203.50(d)), the cost to wholesale distributor and thus may not potentially be conflicting. This result

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Section 203.60(f) the proposed rule was issued. 503(d)(2)(C) and (d)(3)(C) of the act Proposed § 203.60(f) stated that any The agency agrees with the comment specifically require that records for drug person required to create or maintain that it is appropriate to establish one samples be maintained for 3 years and request and receipt forms, reports, lists, record retention period for all wholesale that FDA has no authority to require or other records under PDMA, PDA, or distribution records required to be retention for a longer period. part 203 shall make them available upon created and maintained under PDMA Several comments recommended that request, in a form that permits copying and parts 203 and 205. The agency has the proposed section be revised to or other means of duplication, to FDA determined that because the shelf life of require a maximum record retention or other Federal, State, or local the majority of prescription drug period of 3 years. One comment products is longer than the 2-year regulatory and law enforcement officials recommended revising the section to for review and reproduction. period specified in § 205.50(f)(2), that require retention for the greater of 3 period is insufficient to facilitate recalls On its own initiative, the agency has years from the time of creation or 1 year revised proposed § 203.60(f) by manufacturers and to enable the after the date of expiration. Another agency to respond to public health (renumbered § 203.60(e)) to specify that comment recommended allowing the records must be made available emergencies related to prescription drug manufacturers and distributors to distribution. Moreover, certain records within 2 business days of a request. The decide how to meet PDMA agency believes that this constitutes a required to be created and maintained requirements, while still being under part 203, such as drug origin reasonable period of time to obtain accountable to provide a complete records kept off-site and is consistent statements and written authorization distribution history. agreements between manufacturers and with other PDMA record production The agency agrees that the burdens distributors, are not linked to the requirements. associated with the record-retention disposition of a particular drug product requirement in proposed § 203.60(e)(2) J. Penalties and Rewards or drug products. Therefore, the agency may outweigh its benefits. Although the has decided to adopt the record- In the preamble to the proposed rule use of the expiration date as a reference retention period specified in proposed (59 FR 11842 at 11860), the agency point would ensure that the record is § 203.60(e)(1) (renumbered § 203.60(d)), stated that ‘‘most violations of the act kept for the full shelf life of the drug which is 3 years from the time of are punishable as misdemeanors.’’ The sample, drug sample distribution creation of a record, for all wholesale agency later stated that ‘‘most PDMA distribution records required under records may refer to different types of violations are felonies punishable by a PDMA, including those wholesale drugs from varying lots that have prison term of not more than 10 years, distribution records required under different expiration dates. Thus, as a fine of not more than $250,000, or § 205.50(f)(1). Section 205.50(f)(2) has noted by the comments, requiring a both * * *.’’ been amended to incorporate the 3-year record retention period based on 96. One comment stated that the two requirement. expiration dating would necessitate statements made by the agency are maintaining different distribution conflicting and should be reconciled. 2. Section 203.60(e)(2) records for different periods of time or The agency clarifies that the first Proposed § 203.60(e)(2) stated: ‘‘Any maintaining all records for a period that statement (‘‘most violations of the act person required to create or maintain is based on the drug or drugs with the are punishable as misdemeanors’’) refers reports, or records relating to the longest shelf life. The agency believes to the entire act (see sections 303(a)(1) distribution of drug samples shall retain that retention of records relating to drug and (a)(2) of the act), not the PDMA them for at least 3 years after the date samples for 3 years from the time of provisions. As stated in the preamble to of their creation or 3 years after the date their creation is sufficient to effectuate the proposed rule (59 FR 11842 at of expiration of a drug sample for which recalls and to maintain accountability 11860), most PDMA violations, except the record is being kept, whichever is over sample distribution. Accordingly, for the distribution of a drug sample in later.’’ the agency has eliminated proposed violation of section 503(d) of the act and 95. Several comments contended that § 203.60(e)(2) in the final rule. Under the failure to comply with the drug the additional burdens that would result revised § 203.60(d), all records under origin statement requirement in section from record retention requirements over PDMA and part 203, including records 503(e)(1)(A) of the act, are felonies. 3 years outweigh the possible benefits. relating to the distribution of drug One comment stated that the proposed samples, must be retained for 3 years K. Amendments to 21 CFR Part 205 section would require drug sample from the date of their creation. In the proposal, the agency proposed records to be kept a minimum of 6 an amendment to the introductory 3. Section 203.60(e)(3) years. Two comments stated that it paragraph of § 205.50(c) that would could require record retention for 8 On its own initiative, the agency is require that prescription drugs be stored years. One comment stated that ‘‘if a deleting proposed § 203.60(e)(3) in the by wholesale distributors at appropriate practitioner signs a receipt for two final rule. The proposed requirement temperatures and under appropriate different drug samples with different would have required manufacturers and conditions in accordance with the expiration dates, a manufacturer has to authorized distributors of record to labeling requirements of the drugs or go through line by line to see if a record maintain records of drug sample with the requirements of USP XXII. The has to be kept.’’ A similar comment distribution identifying the drugs agency also proposed an amendment to stated that the proposed section would distributed, the recipients of the § 205.50(c)(1) that would require that, if require either implementation of a distributions, and all drug samples no storage requirements are established complicated and expensive process for destroyed or returned to the for a prescription drug, the drug must be retaining records to make maximum manufacturer for 3 years. The agency held at ‘‘controlled room temperature’’ effective use of storage space or storage believes that the final rule, as revised, as defined in USP XXII. Current of all records for the same length of contains adequate recordkeeping § 205.50(c)(1) states that, if no storage time, taking into account the drug with provisions to ensure accountability over requirements are established for a the longest shelf life plus 3 years. drug sample distribution. prescription drug, the drug ‘‘may’’ be

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In addition, the proposed changes to § 205.50(c) on the paperwork for each section of the agency has revised the analysis of grounds that FDA incorrectly proposal by a standard hourly wage rate. impacts section in the final rule to characterized the changes as ‘‘technical In addition, based on its finding that include estimates of nonpaperwork changes’’ in the preamble and has given many of the requirements in the costs of the final rule, such as storage inadequate notice and opportunity to proposed rule have been implemented costs associated with retaining records. comment on the changes under section by regulated industry, including small 100. Two comments disagreed with 553 of the Administrative Procedures entities, the agency certified that the FDA’s assertion that most of the Act (APA). The comment stated that proposed rule would not have a proposed requirements have been incorporation by reference of USP significant economic impact on a implemented by the industry in standards in § 205.50(c) and requiring substantial number of small entities. response to PDMA’s enactment, FDA’s adherence to USP standards for 98. One comment stated that ‘‘FDA’s guidance, and industry trade controlled room temperature in assessment of all costs and benefits of associations’ recommendations. One of § 205.50(c)(1) would significantly available regulatory alternatives and the comments stated that the proposed increase the burdens on industry in selected regulatory approaches does not rule contains items which are a complying with § 205.50. According to prove that the proposed rule maximizes ‘‘significant departure’’ from currently the comment, such ‘‘substantive’’ net benefits.’’ The comment stated that understood requirements. The comment changes cannot be made unless FDA the proposed rule will have a cited the following specific proposed fully informs interested parties about ‘‘significant negative effect on the requirements and recommendations: the elements of the new standard, industry, health care costs, the The requirement under proposed including any new compliance environment, and State licensing § 203.60(e)(2) for retention of drug obligations, and provides an agencies.’’ This impact, the comment sample records for 3 years past the opportunity for comment on the impact stated, is not outweighed by benefits in expiration date of the drug sample; the of the changes. The comment controlling, preventing, or detecting requirement under proposed § 203.37(b) recommended that ‘‘FDA initiate diversion, or by adding significantly to for reporting possible falsifications of rulemaking proceedings that will the safety of the consumer. Another drug sample records; the requirement adequately apprise interested parties of comment stated that the proposed rule under proposed § 203.38(c) for labeling the issues involved’’ and forbear from would add significant costs, including of sample units; the requirements under enforcing the proposed changes until new systems costs, without proposed §§ 203.30 and 203.31 for drug the completion of the rulemaking. corresponding benefits. sample receipts; and the agency’s The agency agrees that the proposed The agency believes that the final rule recommendation in the proposal that amendments to § 205.50(c) amount to is consistent with the principles set bid or commercial samples be tracked more than ‘‘technical changes’’ and that forth under Executive Order 12866. The using PDMA sample controls. they should be the subject of a separate benefits of the final rule, including the As discussed previously, many of the proposal with a more detailed public health and safety benefits, have proposed requirements and explanation of the associated issues and been discussed extensively in the recommendations cited by the comment impacts. Accordingly, the agency has proposal and in this notice. The have been deleted or substantially decided to withdraw its proposal of estimated costs to industry of the final modified in the final rule in response to these amendments. Should the agency regulation, which are due primarily to other comments or on the agency’s decide to repropose the amendments in additional paperwork costs, are set forth initiative. Nevertheless, FDA the future, it will do so in a manner that in section IV.B of this document and acknowledges that some of the proposed provides sufficient notice and have been substantially revised from the requirements may not have been opportunity for comment. estimates provided in the proposal. The implemented by industry at the time the agency has attempted to accurately proposal was published and that too L. Analysis of Impacts in the Proposed represent the benefits and costs of the much reliance may have been placed by Rule final regulation, has carefully analyzed the agency on prior industry In the section entitled ‘‘Analysis of them, and believes that the regulatory implementation in the ‘‘Analysis of Impacts’’ in the preamble to the approaches chosen for the final rule Impacts’’ section of the proposal. The proposal (59 FR 11842 at 11860 and maximize net benefits. agency has significantly revised its 11861), the agency provided its 99. One comment stated that the analysis of impacts for the final rule. assessment of the impacts of the agency’s financial impact estimates are proposed rule under Executive Order ‘‘much too low.’’ According to the M. Estimated Annual Reporting and 12866 and the Regulatory Flexibility Act comment, FDA has not considered costs Recordkeeping Burden (Public Law 96–354). The agency stated associated with the proposed 101. Several comments stated that the that the proposed rule is consistent with requirements, including travel and estimated burdens set forth under the the principles set out in the Executive personnel expenses in conjunction with ‘‘Paperwork Reduction Act of 1980’’ Order and is not a significant regulatory inventorying sales representatives and section of the proposed rule (59 FR action as defined by the Executive conducting investigations, increased 11842 at 11861) were too low. One Order. The agency explained that most paperwork in conjunction with comment stated that FDA grossly of the requirements in the proposed rule comarketing agreements, and underestimated the annual reporting have already been implemented by the administrative and other costs in and recordkeeping burden and that both regulated industry in response to conjunction with longer record industry and FDA will be burdened PDMA’s enactment, FDA’s guidance, maintenance periods and tracking of bid more than anticipated by and industry trade associations’ and commercial samples. implementation of many of the recommendations. The agency As discussed in section IV.C of this regulations. Another comment stated determined that the regulatory costs of document, the agency has significantly that ‘‘the agency’s predicted time the proposal are due to increased increased its estimates of the reporting estimates to comply with the rule are so

VerDate 29-OCT-99 09:33 Dec 02, 1999 Jkt 190000 PO 00000 Frm 00058 Fmt 4700 Sfmt 4700 E:\FR\FM\A03DE0.001 pfrm02 PsN: 03DER1 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations 67751 unrealistic as to be arbitrary and Reform Act (Public Law 104–4). will continue to incur an estimated $39 capricious.’’ Executive Order 12866 directs agencies million in annual costs for those One comment cited specific examples to assess all costs and benefits of activities initiated shortly after PDMA of estimates that it considered to be too available regulatory alternatives and, was enacted into law by Congress 10 low. The comment stated that the when regulation is necessary, to select years ago. Thus, the total cost of PDMA agency’s estimate of 30 minutes to regulatory approaches that maximize and this implementing rule is comply with the recordkeeping net benefits (including potential approximately $82 million. Almost all requirements under proposed economic, environmental, public health of the costs are associated with sample § 203.31(d) ‘‘grossly understates the and safety, and other advantages; distribution, and most are related to time and expense to comply.’’ The distributive impacts; and equity). The paperwork requirements. comment stated that the estimate of 30 Regulatory Flexibility Act requires an 1. Cost of Sample Distribution seconds to comply with §§ 203.30(c) analysis of regulatory options that Requirements and 203.31(c) takes into account only would minimize any significant the time necessary to sign a sample economic impact of a rule on small a. Paperwork costs. The paperwork receipt, but not the time necessary for a entities unless an agency certifies that a section of this preamble shows the representative to fill out the receipt with rule will not have a significant hourly reporting and recordkeeping the required information or the time that economic impact on a substantial burden estimates for all of the sample a representative will have to wait for a number of small entities. The Unfunded distribution requirements, including the practitioner or his or her designee to Mandates Reform Act requires that following: Request and receipt forms, sign the receipt. The comment stated agencies prepare an assessment of license verification, inventory of that the agency’s estimate of 30 and 60 anticipated costs and benefits before representatives, notification of FDA and minutes to meet the recordkeeping proposing any rule that may result in investigation of losses and falsified requirements under proposed the expenditure by State, local, and information, representative lists and § 203.37(a) and (b), respectively, may tribal governments, in the aggregate, or sample storage sites, representative accurately reflect the time necessary to by the private sector, of $100 million conviction reports, written policies, write up the report, but not to initiate (adjusted annually for inflation) in any assignment of individuals responsible and complete a thorough investigation. 1 year. The agency believes that this for sample information, donation According to the comment, the estimate final rule is consistent with the records, and inventory records and of 24 hours to prepare policies and regulatory philosophy and principles reconciliation reports. These costs will procedures under proposed § 203.34 identified in the Executive Order, be shared by those manufacturers, underestimates the time it will take for Regulatory Flexibility Act, and distributors, and charities subject to the a company to research its activities, Unfunded Mandates Reform Act. above requirements. These individuals prepare and revise draft guidance should already possess the necessary A. Regulatory Benefits documents, type the material, and professional skills to comply with these obtain management approval. The Through this regulation, the agency is paperwork requirements. To determine comment stated that the agency establishing procedures and the paperwork costs for the sample neglected to provide an estimate for the requirements implementing PDMA. As distribution requirements, FDA time it will take to comply with discussed extensively above and in the assumed that sales representatives proposed § 203.60. Finally, the preamble of the proposed rule, the would complete the majority of the comment stated that FDA has ignored requirements in the final rule will, request and receipt forms. In the case of the burden the proposal will place on consistent with Congress’ intent in sample distribution by mail or common the agency. enacting PDMA, help to prevent the sale carrier, the agency assumed that an Based upon the comments, the agency of subpotent, adulterated, counterfeit, or administrator in the practitioner’s office has significantly modified and increased misbranded prescription drugs and drug would complete the request and receipt its estimate of the reporting and samples to the American public. For forms. Also, the agency believes that an recordkeeping burdens associated with example, the final rule establishes individual in the office would be the final rule under the section of this procedural and recordkeeping authorized to sign the receipt forms for notice entitled ‘‘Paperwork Reduction requirements for drug sample the practitioner. Using 1995 hourly Act of 1995.’’ Regarding the absence of distribution that will help to prevent the earnings of approximately $244 a burden estimate for proposed § 203.60, diversion and sale of drug samples. The (including 40 percent for benefits) for the agency advises that it has included final rule also establishes wholesale sales representatives and executive, an estimate of the costs associated with distribution requirements that will administrative, and managerial the record retention requirement in permit the distribution chain of positions, the estimated total annual revised § 203.60 in section IV.B of this prescription drugs to be traced, and will paperwork costs for the sample document. Finally, the agency expects make unauthorized wholesale distribution requirements are $79 its administrative costs associated with distributors more accountable. In sum, million. Approximately $36 million of oversight of the final rule to be minimal. the final rule establishes controls over these costs have been incurred annually As discussed below, the public has 60 the distribution of prescription drugs since PDMA’s enactment. The days from the publication of the final and drug samples that will help to remaining $43 million are sample rule to comment on the accuracy of ensure that drugs are safe and effective paperwork costs that will go into effect FDA’s revised burden estimates, and the not only when they leave as a result of this regulation. These agency encourages interested parties to manufacturers, but when they reach additional costs include: $22.6 million do so. consumers. for receipt recordkeeping, $2.6 million IV. Analysis of Impacts B. Regulatory Costs for license verification, $2.1 million for establishing written policies and FDA has examined the impacts of the FDA estimates that the incremental final rule under Executive Order 12866, costs that will result from the issuance 4 Employment and Earnings, U.S. Department of the Regulatory Flexibility Act (5 U.S.C. of this rule will amount to about $43 Labor, Bureau of Labor Statistics, January 1996, pp. 601–612), and the Unfunded Mandates million annually. Moreover, industry 205 and 206.

VerDate 29-OCT-99 09:33 Dec 02, 1999 Jkt 190000 PO 00000 Frm 00059 Fmt 4700 Sfmt 4700 E:\FR\FM\A03DE0.001 pfrm02 PsN: 03DER1 67752 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations procedures for sample distribution, and not include any printing costs for mail- themselves. Therefore, no travel $15.6 million for the lot or control requests, assuming that a paper expenses will be incurred for this number requirements. exchange already occurred in the purpose. The agency also assumes that b. Other request and receipt form marketplace for this purpose. In most manufacturers and distributors costs. Sample request and receipt forms addition, the agency believes that, in and their representatives are currently are required under PDMA for samples most cases, manufacturers and following proper storage and handling delivered by mail or common carrier. distributors will combine the receipt requirements to prevent the distribution Under the final rule, FDA is also and request forms when samples are of adulterated samples. In addition, the requiring receipt forms to be used when delivered by a representative. Therefore, agency believes that it is already part of samples are delivered by none of the above printing costs are new company policy for manufacturers and representatives. To minimize printing to this regulation. distributors to investigate significant and storage costs, FDA believes c. Other license verification costs. The losses and known thefts of samples and companies will primarily use one final rule will require manufacturers common practice to label sample units combination request and receipt form and authorized distributors of record to so they may be tracked in recall for samples delivered by representatives verify with the State that the situations. and separate request and receipt forms practitioner to whom samples are for mail delivery. Therefore, a total of distributed is licensed or authorized by 2. Nonsample-Related Costs three forms will be used, one of which law to prescribe the drug product. To To determine the costs associated will be new with this rule. The agency evaluate the cost of compliance with with the nonsample-related estimates that the development and this requirement, the agency spoke with requirements, the agency multiplied the approval of each form may take a representative of the Board of $24 hourly rate10 for sales approximately 2 hours of an Physician Quality Assurance in representatives and executive, administrator’s time. Taking into Maryland. FDA found that it costs administrative, and managerial consideration the 2,208 manufacturers approximately $500 to purchase a list of positions by the burden hours estimated and distributors who distribute samples all active practitioners with a license in under the paperwork section of this (691 manufacturers of pharmaceutical the State of Maryland. Due to the high preamble. These annual paperwork preparations5 plus 25 percent of the cumulative cost for each manufacturer costs are grouped into the following 6,069 establishments of wholesale to purchase a list from every State (or categories: Reimportation, sales distributors of drugs, drug properties, from as many States as their distribution restrictions, and wholesale distribution. and druggists’ sundries6), the total one- reaches), provide it to their distributors, To calculate reimportation costs, the time cost of developing these forms is and update it on a regular basis, it is agency used the salary data for approximately $318,000 (2 hours x 3 likely that market forces will establish a executive and managerial positions. As forms x 2,208 x $24). Of this amount, more efficient process. For example, a few requests for emergency the one-time cost of developing the third party could easily purchase the reimportation are expected, the annual additional form attributable to this information and sell it to manufacturers. paperwork costs for all reimporters to regulation is approximately $106,000 (2 Considering the costs for third parties to fill out the emergency reimportation hours x 1 form x 2,208 x $24). purchase, manipulate, and disseminate application total only $144. The annual Manufacturers and distributors also this information, the agency believes cost of the credit memo and storage incur annual printing costs associated that $500 to $1,000 would be a documentation required under ‘‘Sales with the distribution of these forms. reasonable price range for charges by Restrictions’’ is shared by hospitals, After evaluating several printing third parties to manufacturers for healthcare entities, and charities, and is estimates, the agency selected $0.025 nationwide data. For the purpose of this estimated at $1.3 million. Wholesale per page as a reasonable printing cost. analysis, FDA assumes that each of the distribution requirements, including the Based on the paperwork estimates of 691 manufacturers9 would pay an drug origin statement and distributor approximately 32.5 million request and average of $750 each year, yielding total list, are estimated to impose receipt forms for delivery by annual costs of approximately $518,000 recordkeeping costs of $258,000 per 7 representatives and 750,000 receipt to meet the license verification year on manufacturers and distributors. forms for mail-delivery (20 percent of requirement. The agency does not All of the previous costs were initiated 309,807 offices and clinics of doctors of calculate any costs for manufacturers to by the enactment of PDMA and will not 8 medicine and dentists x 12 per year), disseminate this information, but be significantly affected by the issuance the agency estimates that manufacturers instead assumes that the license of this rule. and distributors incur printing costs of numbers would be added to the list of approximately $831,00 annually ((32.5 physicians that is currently provided to 3. Storage Costs for Sample and million + 750,000) x 0.025). FDA does sales representatives on a yearly basis. Nonsample-Related Requirements d. Other sample distribution The final rule requires that 5 ‘‘Drugs Industry Series,’’ 1992 Census of requirements. The other requirements of manufacturers and/or distributors retain Manufacturers, U.S. Department of Commerce, the rule entailed negligible costs, were Economics and Statistics Administration, Bureau of records for at least 3 years, including the the Census, Table 4, pp. 28C to 12. already part of industry practice, or following documents: Drug return 6 ‘‘United States,’’ 1992 Census of Wholesale were attributable to the overall cost of memos, request and receipt forms, drug Trade, U.S. Department of Commerce, Economics doing business. For example, FDA sample inventory records and and Statistics Administration, Bureau of the assumes all charities that receive reconciliation reports, representative Census, Table 1, pp. US to 11. samples have a licensed practitioner on 7 Data from IMS, 1996, as presented to FDA on lists, and drug origin statements. In May 27, 1997. Data included an estimated 18.1 staff and that the cost of examining drug 1995, the average expected annual rent million office calls, 8.1 million service calls, and sample packaging is negligible. The for space in commercial buildings 6.3 million hospital calls made in 1996. final rule also permits the inventory of equaled $9.43 per square foot.11 For 8 ‘‘Establishment and Firm Size,’’ 1992 Census of samples held by sales representatives to Service Industries, U.S. Department of Commerce, Economics and Statistics Administration, Bureau of be conducted by the representatives 10 Employment and Earnings, pp. 205 and 206. the Census, Tables 1a and 1b, pp. 1 to 38 and pp. 11 Dodge, F. W., Dodge Construction Potentials, 1 to 51. 9 ‘‘Drugs Industry Series,’’ Table 4, pp. 28C to 12. McGraw-Hill, Inc., 1996.

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While some small reimporters will be replace the most previous year’s, In addition, the agency found that 94 affected by the reimportation restriction, indicating that no more than 15 square percent of the distribution firms, or this impact will be moderated because feet of storage space will be necessary. approximately 4,000 firms, are small.13 most also import non-U.S. drugs or FDA estimates that up to approximately However, as stated previously, the other products. The cost impact on 2,500 manufacturers and distributors agency believes that the majority of charities will be minimal. will be affected; therefore, average these do not distribute samples, and annual storage costs will amount to thus will not be affected by the rule. 3. Estimate of the Recordkeeping approximately $118,000 in year 1, According to SBA’s definition, general Burden $236,000 in year 2, and $354,000 in medical and surgical hospitals, and the The majority of the costs of this each year thereafter. Though retention offices and clinics of dentists and regulation are derived from the of drug return memos is also required of doctors of medicine that are either not- paperwork requirements. The hospitals and charities, the agency for-profit or have $5 million or less in manufacturers, distributors, and believes these costs are negligible. Some revenue are also considered small. charities involved in the sample of these storage requirements were Using this definition, FDA determined distribution process are required to initiated by PDMA, but other storage that approximately 96 percent of the comply with the recordkeeping requirements have been added by this hospitals (or approximately 4,000 requirements specified earlier in this regulation. The agency did not separate hospitals)14 and 99 percent of the offices analysis. These individuals should these storage costs for the purpose of and clinics (or approximately 268,000 already possess the necessary skills to this analysis. offices and clinics)15 are small. In establish written policies and addition, due to their nonprofit status, procedures, complete forms and C. Small Business Analysis the agency assumes that the 3,112 applications, and prepare the required The agency has analyzed this rule in charities expected to be affected by this documentation. The paperwork accordance with the Regulatory rule (based on a portion of not-for-profit specified by this rule does not require Flexibility Act to determine its effect on hospitals,16 doctors’ offices, and any special professional training or small entities. clinics17) would be considered small by skills to complete and would be of a 1. Need for and Objectives of the Rule SBA. As noted in the paperwork section type already being handled by of this regulation, FDA believes that regulatory affairs professionals who are As stated previously, PDMA was approximately 12 importers will be employed by drug manufacturers and enacted by Congress to prevent the sale affected by this rule, and assumes that distributors. of subpotent, adulterated, counterfeit, or the majority of them are small. misbranded drugs. Through this The agency notes that the great 4. Analysis of Alternatives regulation, the agency is establishing the majority of the costs of this rule will be FDA could have implemented the rule procedures and requirements to incurred by the manufacturers and as proposed, but instead, the agency implement PDMA. The final rule distributors that distribute drug took several steps to minimize the facilitates the goals of PDMA by samples. The costs will not be evenly economic impact on small entities. establishing procedural and distributed, but directly related to the Specifically, the agency reduced or recordkeeping requirements for drug size of each company’s sales force. eliminated several of the requirements sample distribution that will help to According to Census data, less than 10 under the proposed rule. Examples of prevent the diversion and sale of drug percent of the manufacturing companies this can be found under the samples. In addition, the final rule in the pharmaceutical preparations requirements for sample inventory, lot establishes wholesale distribution industry have 90 percent of the or control numbers, sample unit requirements that will permit the industry’s sales.18 Likewise, identification, and sample record distribution chain of prescription drugs approximately 1 percent of the firms retention. Under the proposal, the to be traced, and will make distributing drugs, drug proprietaries, inventory of drug samples held by sales unauthorized wholesale distributors representatives would be conducted by more accountable. 12 ‘‘Drugs Industry Series,’’ Table 4, pp. 28C to 12. an executive other than the 13 ‘‘Establishment and Firm Size,’’ 1992 Census of representative or the immediate 2. Description and Estimate of the Wholesale Trade, U.S. Department of Commerce, Number of Small Entities Economics and Statistics Administration, Bureau of supervisor. Comments emphasized the the Census, Table 7, pp. 1 to 186. costliness of this requirement, According to the Small Business 14 ‘‘Establishment and Firm Size,’’ 1992 Census of indicating it was time consuming and Administration (SBA), distributors of Service Industries, Table a and 4b, pp. 1 to 174 and entailed travel expenses to regional drugs, drug proprietaries, and druggists’ pp. 1 to 184. sales offices. In response to these 15 ‘‘Establishment and Firm Size,’’ 1992 Census of sundries with 100 or fewer employees comments, the final rule allows sales or manufacturers of pharmaceutical Service Industries, Table 4a and 4b, pp. 1 to 171 and pp. 1 to 183. representatives and their supervisory preparations with 750 or fewer 16 The Statistical Abstract of the United States, personnel to conduct the inventory and employees are considered small entities. U.S. Department of Commerce, Bureau of the reconciliation functions. Also, in The U.S. Census does not disclose data Census, 1996, No. 187, p. 127. response to comments on the proposal, 17 ‘‘Establishment and Firm Size,’’ 1992 Census of on the number of drug manufacturing FDA reduced the administrative burden firms by employment size, but between Service Industries, Table 1b, pp. 1 to 51. 18 ‘‘Concentration Ratios in Manufacturing,’’ 1992 92 percent and 96 percent of drug Census of Manufacturers, U.S. Department of 19 ‘‘Establishment and Firm Size,’’ 1992 Census of manufacturing establishments, or Commerce, Economics and Statistics Wholesale Trade, Tables 7 and 8, pp. 1 to 186 and approximately 650 establishments, are Administration, Bureau of the Census, Table 3. pp. 1 to 218.

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Also, in response to comments, estimated time to investigate possible State licensing of wholesale prescription the agency is allowing the use of significant loss or theft of samples from drug distributors. Because enforcement adhesive stickers on retail units to 1 hour to 24 hours. In addition, the of these sections of PDMA is a Federal designate a sample unit as a sample. agency identified and estimated the responsibility, there should be little, if The final rule reduces the drug sample burden associated with requirements any, impact from this rule on the States, record retention period, which was other than recordkeeping that were not on the relationship between the national proposed as 3 years from the sample quantified under the proposed rule. For government and the States, or on the expiration date. The agency decided example, FDA allotted 2 hours for the distribution of power and that retention of drug sample records for development of each of the sample responsibilities among the various 3 years from the date of their creation request and receipt forms. The annual levels of government. In addition, this is sufficient for recall facilitation and printing costs associated with these regulation does not preempt State law. proper accountability over sample forms have also been assessed. Storage Accordingly, FDA has determined distribution. costs have been added as necessitated that this final rule does not contain The agency considered minimizing by the paperwork requirements of this policies that have federalism the impact of this rule by not requiring regulation. implications or that preempt State law. manufacturers and authorized VI. Paperwork Reduction Act of 1995 distributors to verify with the State that D. Conclusion the practitioner to whom samples are FDA calculated both the incremental This final rule contains information distributed is licensed or authorized by costs of this final rule and the costs collection provisions that are subject to law to prescribe the drug product. initially imposed upon the enactment of review by the Office of Management and However, under the final rule, this PDMA, and determined that there are Budget (OMB) under the Paperwork license verification requirement was one-time costs of $318,000 for Reduction Act of 1995 (44 U.S.C. 3501– added in response to comments. The developing forms, and total annual costs 3520). The title, description, and cost of this requirement is estimated at of approximately $82 million. respondent description of the approximately $3.2 million per year. Approximately $39 million of these information collection provisions are The agency determined that this annual costs have been incurred by shown below with an estimate of the requirement is the only reliable way of industry since the enactment of PDMA annual reporting and recordkeeping proving that the practitioner requesting by Congress in 1988. An estimated burden. Included in the estimate is the samples is actually licensed by a State additional $43 million per year will time for reviewing instructions, to prescribe drugs. The agency does not result from the new requirements in this searching existing data sources, believe that allowing a manufacturer to regulation. This rule is not a significant gathering and maintaining the data deem acceptable a license or regulatory action as defined by the needed, and completing and reviewing authorization number on a request form Executive Order, and is therefore not each collection of information. without verifying its authenticity would subject to review under the Executive Title: Prescription Drug Marketing Act offer any such assurance. Order. This rule does not impose any of 1987; Policies, Requirements, and The agency considered eliminating mandates on State, local, or tribal Administrative Procedures. the receipt requirement for governments, nor is it a significant Description: The final rule provides representative-delivered samples. This regulatory action under the Unfunded for the collection of information from would reduce the cost of the final Mandates Reform Act. Finally, the establishments engaged in the regulation by approximately $22.6 agency has analyzed this rule in reimportation and wholesale million per year. However, although accordance with the Regulatory distribution of prescription drugs; the Congress did not expressly require a Flexibility Act and provided each of the sale, purchase, or trade of (or offer to receipt for representative-delivered elements required for a final regulatory sell, purchase, or trade) prescription samples, FDA concluded that this flexibility analysis. drugs by hospitals, health care entities, requirement is necessary to help ensure and charitable institutions; the V. Executive Order 13132: Federalism effective enforcement, increased distribution of prescription drug accountability and oversight of sample FDA has analyzed this final rule in samples; and the wholesale distribution distribution, and to provide adequate accordance with Executive Order 13132: of prescription drugs. safeguards against drug sample Federalism. Executive Order 13132 Description of Respondents: diversion. requires Federal agencies to carefully Businesses, hospitals, health care examine actions to determine if they entities, charitable institutions, and 5. Response to Comments contain policies that have federalism other for-profit and not-for-profit Several of the comments indicated implications or that preempt State law. organizations; small businesses or that the initial economic analysis As defined in the Order, ‘‘policies that organizations. understated the impact of the proposed have federalism implications’’ refers to Although the March 1994 proposal rule. FDA reevaluated and significantly regulations, legislative comments or provided a 60-day comment period increased the paperwork estimates to proposed legislation, and other policy under the Paperwork Reduction Act of more accurately reflect industry’s statements or actions that have 1980, and this final rule responds to the implementation of this final regulation. substantial direct effects on the States, comments received, FDA is providing

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TABLE 1.ÐESTIMATED ANNUAL REPORTING BURDEN1

Annual 21 CFR Section No. of Frequency per Total Annual Hours per Total Hours Respondents Response Responses Response

203.11 12 1 12 .5 6 203.30(a)(1) and (b) 61,961 12 743,532 .06 44,612 203.30(a)(3), (a)(4), and (c) 61,961 12 743,532 .06 44,612 203.31(a)(1) and (b) 232,355 135 31,367,925 .04 1,254,717 203.31(a)(3), (a)(4), and (c) 232,355 135 31,367,925 .03 941,038 203.37(a) 25 1 25 6.00 150 203.37(b) 200 1 200 6.00 1,200 203.37(c) 50 1 50 1.00 50 203.37(d) 2,208 1 2,208 .08 177 203.38(a) 2,208 1 2,208 3.00 6,624 203.39(g) 3,221 1 3,221 2.00 6,442 203.50(a) 125 100 12,500 .08 1,000 Total Hours 2,300,628 1 There are no capital costs or operating and maintenance costs associated with this collection of information.

TABLE 2.ÐESTIMATED ANNUAL RECORDKEEPING BURDEN1

Annual 21 CFR Section No. of Frequency per Total Annual Records Hours per Total Hours Recordkeepers Recordkeeping Recordkeeper

203.23(a) and (b) 31,676 5 158,380 .25 39,595 203.23(c) 31,676 5 158,380 .08 12,670 203.30(a)(2) and 203.31(a)(2) 2,208 100 220,800 .50 110,400 203.31(d)(1) and (d)(2) 2,208 1 2,208 40.00 88,320 203.31(d)(4) 442 1 442 24.00 10,608 203.31(e) 2,208 1 2,208 1.00 2,208 203.34 2,208 1 2,208 40.00 88,320 203.37(a) 25 1 25 18.00 450 203.37(b) 200 1 200 18.00 3,600 203.38(b) 2,208 14,543 32,111,457 .02 642,229 203.39(d) 65 1 65 1.00 65 203.39(e) 3,221 1 3,221 .50 1,610 203.39(f) 3,221 1 3,221 8.00 25,768 203.39(g) 3,221 1 3,221 8.00 25,768 203.50(a) 125 100 12,500 .17 2,125 203.50(b) 125 100 12,500 .50 6,250 203.50(d) 691 1 691 2.00 1,382 Total Hours 1,061,368 1 There are no capital costs or operating and maintenance costs associated with this collection of information.

Section 203.38(c) is exempt from VII. Environmental Impact neither an environmental assessment recordkeeping requirements because the The agency has determined under 21 nor an environmental impact statement information it requires to be placed on CFR 25.30(h) that this action is of a class is required. drug sample labeling is provided by the of actions that do not individually or agency. cumulatively have a significant effect on the human environment. Therefore,

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List of Subjects Subpart EÐWholesale Distribution a drug and that, when used in the manufacturing, processing, or packaging 21 CFR Part 203 203.50 Requirements for wholesale distribution of prescription drugs. of a drug, becomes an active ingredient Drugs, Labeling, Manufacturing, or a finished dosage form of the drug, Subpart FÐRequest and Receipt but the term does not include Prescription drugs, Reporting and Forms, Reports, and Records recordkeeping requirements, intermediates used in the synthesis of Warehouses. 203.60 Request and receipt forms, reports, such substances. and records. (f) Charitable institution or charitable 21 CFR Part 205 organization means a nonprofit hospital, Subpart GÐRewards health care entity, organization, Intergovernmental relations, 203.70 Application for a reward. institution, foundation, association, or Prescription drugs, Reporting and Authority: 21 U.S.C. 331, 333, 351, 352, corporation that has been granted an recordkeeping requirements, Security 353, 360, 371, 374, 381. exemption under section 501(c)(3) of the measures, Warehouses. Subpart AÐGeneral Provisions Internal Revenue Code of 1954, as Therefore, under the Federal Food, amended. Drug, and Cosmetic Act and under § 203.1 Scope. (g) Common control means the power authority delegated to the Commissioner This part sets forth procedures and to direct or cause the direction of the of Food and Drugs, 21 CFR chapter I is requirements pertaining to the management and policies of a person or an organization, whether by ownership amended as follows: reimportation and wholesale distribution of prescription drugs, of stock, voting rights, by contract, or 1. Part 203 is added to read as follows: including both bulk drug substances otherwise. and finished dosage forms; the sale, (h) Distribute means to sell, offer to PART 203ÐPRESCRIPTION DRUG purchase, or trade of (or the offer to sell, sell, deliver, or offer to deliver a drug to MARKETING purchase, or trade) prescription drugs, a recipient, except that the term Subpart AÐGeneral Provisions including bulk drug substances, that ‘‘distribute’’ does not include: were purchased by hospitals or health (1) Delivering or offering to deliver a Sec. care entities, or donated to charitable drug by a common carrier in the usual 203.1 Scope. organizations; and the distribution of course of business as a common carrier; 203.2 Purpose. prescription drug samples. Blood and or 203.3 Definitions. blood components intended for (2) Providing of a drug sample to a patient by: Subpart BÐReimportation transfusion are excluded from the restrictions in and the requirements of (i) A practitioner licensed to prescribe 203.10 Restrictions on reimportation. the Prescription Drug Marketing Act of such drug; 203.11 Applications for reimportation to 1987 and the Prescription Drug (ii) A health care professional acting provide emergency medical care. Amendments of 1992. at the direction and under the 203.12 An appeal from an adverse decision supervision of such a practitioner; or by the district office. § 203.2 Purpose. (iii) The pharmacy of a hospital or of another health care entity that is acting Subpart CÐSales Restrictions The purpose of this part is to implement the Prescription Drug at the direction of such a practitioner 203.20 Sales restrictions. Marketing Act of 1987 and the and that received such sample in 203.22 Exclusions. Prescription Drug Amendments of 1992, accordance with the act and regulations. 203.23 Returns. except for those sections relating to (i) Drug sample means a unit of a prescription drug that is not intended to Subpart DÐSamples State licensing of wholesale distributors (see part 205 of this chapter), to protect be sold and is intended to promote the 203.30 Sample distribution by mail or the public health, and to protect the sale of the drug. common carrier. public against drug diversion by (j) Drug coupon means a form that 203.31 Sample distribution by means other establishing procedures, requirements, may be redeemed, at no cost or at than mail or common carrier (direct and minimum standards for the reduced cost, for a drug that is delivery by a representative or detailer). distribution of prescription drugs and prescribed in accordance with section 203.32 Drug sample storage and handling prescription drug samples. 503(b) of the act. requirements. (k) Electronic record means any 203.33 Drug sample forms. § 203.3 Definitions. combination of text, graphics, data, 203.34 Policies and procedures; (a) The act means the Federal Food, audio, pictorial, or other information administrative systems. Drug, and Cosmetic Act, as amended (21 representation in digital form that is 203.35 Standing requests. U.S.C. 301 et seq.). created, modified, maintained, archived, 203.36 Fulfillment houses, shipping and (b) Authorized distributor of record retrieved, or distributed by a computer mailing services, comarketing agreements, and third-party means a distributor with whom a system. recordkeeping. manufacturer has established an (l) Electronic signature means any 203.37 Investigation and notification ongoing relationship to distribute such computer data compilation of any requirements. manufacturer’s products. symbol or series of symbols executed, 203.38 Sample lot or control numbers; (c) Blood means whole blood adopted, or authorized by an individual labeling of sample units. collected from a single donor and to be the legally binding equivalent of 203.39 Donation of drug samples to processed either for transfusion or the individual’s handwritten signature. charitable institutions. further manufacturing. (m) Emergency medical reasons (d) Blood component means that part include, but are not limited to, transfers of a single-donor unit of blood separated of a prescription drug between health by physical or mechanical means. care entities or from a health care entity (e) Bulk drug substance means any to a retail pharmacy to alleviate a substance that is represented for use in temporary shortage of a prescription

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If the distributor is not trade a drug for emergency medical organizations in the same State or same authorized to distribute a reasons; marketing or service area, or nearby manufacturer’s entire product line, the (6) The sale, purchase, or trade of a licensed practitioners, of drugs for use agreement must identify the specific drug, an offer to sell, purchase, or trade in the treatment of acutely ill or injured drug products that the distributor is a drug, or the dispensing of a drug persons; provision of minimal authorized to distribute. under a prescription executed in emergency supplies of drugs to nearby (v) PDA means the Prescription Drug accordance with section 503(b) of the nursing homes for use in emergencies or Amendments of 1992. act; during hours of the day when necessary (w) PDMA means the Prescription drugs cannot be obtained; and transfers Drug Marketing Act of 1987. (7) The distribution of drug samples of prescription drugs by a retail (x) Person includes any individual, by manufacturers’ and authorized pharmacy to another retail pharmacy to partnership, corporation, or association. distributors’ representatives; alleviate a temporary shortage; but do (y) Prescription drug means any drug (8) The sale, purchase, or trade of not include regular and systematic sales (including any biological product, blood or blood components intended for to licensed practitioners of prescription except for blood and blood components transfusion; drugs that will be used for routine office intended for transfusion or biological (9) Drug returns, when conducted by procedures. products that are also medical devices) a hospital, health care entity, or (n) FDA means the U.S. Food and required by Federal law (including charitable institution in accordance Drug Administration. Federal regulation) to be dispensed only with § 203.23; or (o) Group purchasing organization by a prescription, including finished (10) The sale of minimal quantities of means any entity established, dosage forms and bulk drug substances drugs by retail pharmacies to licensed maintained, and operated for the subject to section 503(b) of the act. practitioners for office use. purchase of prescription drugs for (z) Representative means an employee distribution exclusively to its members or agent of a drug manufacturer or (dd) Wholesale distributor means any with such membership consisting solely distributor who promotes the sale of person engaged in wholesale of hospitals and health care entities prescription drugs to licensed distribution of prescription drugs, bound by written contract with the practitioners and who may solicit or including, but not limited to, entity. receive written requests for the delivery manufacturers; repackers; own-label (p) Handwritten signature means the of drug samples. A detailer is a distributors; private-label distributors; scripted name or legal mark of an representative. jobbers; brokers; warehouses, including individual handwritten by that (aa) Sample unit means a packet, card, manufacturers’ and distributors’ individual and executed or adopted blister pack, bottle, container, or other warehouses, chain drug warehouses, with the present intention to single package comprised of one or and wholesale drug warehouses; authenticate a writing in a permanent more dosage units of a prescription drug independent wholesale drug traders; form. The act of signing with a writing sample, intended by the manufacturer and retail pharmacies that conduct or marking instrument such as a pen or or distributor to be provided by a wholesale distributions. stylus is preserved. The scripted name licensed practitioner to a patient in an Subpart BÐReimportation or legal mark, while conventionally unbroken or unopened condition. applied to paper, may also be applied to (bb) Unauthorized distributor means a § 203.10 Restrictions on reimportation. other devices that capture the name or distributor who does not have an No prescription drug or drug mark. ongoing relationship with a (q) Health care entity means any manufacturer to sell or distribute its composed wholly or partly of insulin person that provides diagnostic, products. that was manufactured in a State and medical, surgical, or dental treatment, or (cc) Wholesale distribution means exported from the United States may be chronic or rehabilitative care, but does distribution of prescription drugs to reimported by anyone other than its not include any retail pharmacy or any persons other than a consumer or manufacturer, except that FDA may wholesale distributor. A person cannot patient, but does not include: grant permission to a person other than simultaneously be a ‘‘health care entity’’ (1) Intracompany sales; the manufacturer to reimport a and a retail pharmacy or wholesale (2) The purchase or other acquisition prescription drug or insulin-containing distributor. by a hospital or other health care entity drug if it determines that such (r) Licensed practitioner means any that is a member of a group purchasing reimportation is required for emergency person licensed or authorized by State organization of a drug for its own use medical care. law to prescribe drugs. from the group purchasing organization § 203.11 Applications for reimportation to (s) Manufacturer means any person or from other hospitals or health care provide emergency medical care. who is a manufacturer as defined by entities that are members of such § 201.1 of this chapter. organizations; (a) Applications for reimportation for (t) Nonprofit affiliate means any not- (3) The sale, purchase, or trade of a emergency medical care shall be for-profit organization that is either drug or an offer to sell, purchase, or submitted to the director of the FDA associated with or a subsidiary of a trade a drug by a charitable organization District Office in the district where charitable organization as defined in to a nonprofit affiliate of the reimportation is sought (addresses section 501(c)(3) of the Internal Revenue organization to the extent otherwise found in § 5.115 of this chapter). Code of 1954. permitted by law; (b) Applications for reimportation to (u) Ongoing relationship means an (4) The sale, purchase, or trade of a provide emergency medical care shall association that exists when a drug or an offer to sell, purchase, or be reviewed and approved or manufacturer and a distributor enter trade a drug among hospitals or other disapproved by each district office.

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§ 203.12 An appeal from an adverse (g) The sale, purchase, or trade of, or this section, when the drug sample is decision by the district office. the offer to sell, purchase, or trade blood delivered; and An appeal from an adverse decision or blood components intended for (4) The receipt is returned to the by the district office involving insulin- transfusion. manufacturer or distributor from which containing drugs or prescription human the drug sample was received. drugs, other than biological products, § 203.23 Returns. (b) Contents of the written request may be made to the Office of The return of a prescription drug form for delivery of samples by mail or Compliance (HFD–300), Center for Drug purchased by a hospital or health care common carrier. Evaluation and Research, Food and entity or acquired at a reduced price by (1) A written request for a drug Drug Administration, 7520 Standish Pl., or donated to a charitable institution is sample to be delivered by mail or Rockville, MD 20855. An appeal from exempt from the prohibitions in common carrier to a licensed an adverse decision by the district office § 203.20, provided that: practitioner is required to contain the involving prescription human biological (a) The hospital, health care entity, or following: products may be made to the Office of charitable institution documents the (i) The name, address, professional Compliance and Biologics Quality return by filling out a credit memo title, and signature of the practitioner (HFM–600), Center for Biologics specifying: making the request; Evaluation and Research, Food and (1) The name and address of the (ii) The practitioner’s State license or Drug Administration, 1401 Rockville hospital, health care entity, or charitable authorization number or, where a Pike, Rockville, MD 20852. institution; scheduled drug product is requested, (2) The name and address of the the practitioner’s Drug Enforcement Subpart CÐSales Restrictions manufacturer or wholesale distributor Administration number. from which it was acquired; (iii) The proprietary or established § 203.20 Sales restrictions. (3) The product name and lot or name and the strength of the drug Except as provided in § 203.22 or control number; sample requested; § 203.23, no person may sell, purchase, (4) The quantity returned; and (iv) The quantity requested; or trade, or offer to sell, purchase, or (5) The date of the return. (v) The name of the manufacturer and trade any prescription drug that was: (b) The hospital, health care entity, or the authorized distributor of record, if (a) Purchased by a public or private charitable institution forwards a copy of the drug sample is requested from an hospital or other health care entity; or each credit memo to the manufacturer authorized distributor of record; and (b) Donated or supplied at a reduced and retains a copy of each credit memo (vi) The date of the request. price to a charitable organization. for its records; (2) A written request for a drug sample to be delivered by mail or § 203.22 Exclusions. (c) Any drugs returned to a manufacturer or wholesale distributor common carrier to the pharmacy of a Section 203.20 does not apply to: are kept under proper conditions for hospital or other health care entity is (a) The purchase or other acquisition storage, handling, and shipping, and required to contain, in addition to all of of a drug for its own use by a hospital written documentation showing that the information in paragraph (b)(l) of or other health care entity that is a proper conditions were maintained is this section, the name and address of member of a group purchasing provided to the manufacturer or the pharmacy of the hospital or other organization from the group purchasing wholesale distributor to which the drugs health care entity to which the drug organization or from other hospitals or are returned. sample is to be delivered. health care entities that are members of (c) Contents of the receipt to be the organization. Subpart DÐSamples completed upon delivery of a drug (b) The sale, purchase, or trade of a sample. The receipt is to be on a form drug or an offer to sell, purchase, or § 203.30 Sample distribution by mail or designated by the manufacturer or trade a drug by a charitable organization common carrier. distributor, and is required to contain to a nonprofit affiliate of the (a) Requirements for drug sample the following: organization to the extent otherwise distribution by mail or common carrier. (1) If the drug sample is delivered to permitted by law. A manufacturer or authorized the licensed practitioner who requested (c) The sale, purchase, or trade of a distributor of record may distribute a it, the receipt is required to contain the drug or an offer to sell, purchase, or drug sample to a practitioner licensed to name, address, professional title, and trade a drug among hospitals or other prescribe the drug that is to be sampled signature of the practitioner or the health care entities that are under or, at the written request of a licensed practitioner’s designee who common control. practitioner, to the pharmacy of a acknowledges delivery of the drug (d) The sale, purchase, or trade of a hospital or other health care entity, by sample; the proprietary or established drug or an offer to sell, purchase, or mail or common carrier, provided that: name and strength of the drug sample trade a drug for emergency medical (1) The licensed practitioner executes and the quantity of the drug sample reasons. and submits a written request to the delivered; and the date of the delivery. (e) The sale, purchase, or trade of a manufacturer or authorized distributor (2) If the drug sample is delivered to drug, an offer to sell, purchase, or trade of record, as set forth in paragraph (b) the pharmacy of a hospital or other a drug, or the dispensing of a drug of this section, before the delivery of the health care entity at the request of a under a valid prescription. drug sample; licensed practitioner, the receipt is (f) The sale, purchase, or trade of a (2) The manufacturer or authorized required to contain the name and drug or the offer to sell, purchase, or distributor of record verifies with the address of the requesting licensed trade a drug by hospitals or health care appropriate State authority that the practitioner; the name and address of entities owned or operated by Federal, practitioner requesting the drug sample the hospital or health care entity State, or local governmental units to is licensed or authorized under State pharmacy designated to receive the drug other hospitals or health care entities law to prescribe the drug product; sample; the name, address, professional owned or operated by Federal, State, or (3) The recipient executes a written title, and signature of the person local governmental units. receipt, as set forth in paragraph (c) of acknowledging delivery of the drug

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The receipt is to be on a form including the sender and date of the other than mail or common carrier (direct shipment, and the proprietary or delivery by a representative or detailer). designated by the manufacturer or distributor, and is required to contain established name, dosage strength, and (a) Requirements for drug sample the following: number of sample units received; distribution by means other than mail or (1) If the drug sample is received at (iii) A record of drug sample common carrier. A manufacturer or the address of the licensed practitioner distributions since the most recently authorized distributor of record may who requested it, the receipt is required completed inventory showing the name distribute by means other than mail or to contain the name, address, and address of each recipient of each common carrier, by a representative or professional title, and signature of the sample unit shipped, the date of the detailer, a drug sample to a practitioner practitioner or the practitioner’s shipment, and the proprietary or licensed to prescribe the drug to be designee who acknowledges delivery of established name, dosage strength, and sampled or, at the written request of the drug sample; the proprietary or number of sample units shipped. For such a licensed practitioner, to the established name and strength of the the purposes of this paragraph and pharmacy of a hospital or other health drug sample; the quantity of the drug paragraph (d)(2)(v) of this section, care entity, provided that: sample delivered; and the date of the ‘‘distributions’’ includes distributions to (1) The manufacturer or authorized delivery. health care practitioners or designated distributor of record receives from the hospital or health care entity (2) If the drug sample is received by licensed practitioner a written request pharmacies, transfers or exchanges with the pharmacy of a hospital or other signed by the licensed practitioner other firm representatives, returns to the health care entity at the request of a before the delivery of the drug sample; manufacturer or authorized distributor, licensed practitioner, the receipt is (2) The manufacturer or authorized destruction of drug samples by a sales required to contain the name and distributor of record verifies with the representative, and other types of drug address of the requesting licensed appropriate State authority that the sample dispositions. The specific type practitioner; the name and address of practitioner requesting the drug sample of distribution must be specified in the the hospital or health care entity is licensed or authorized under State record; law to prescribe the drug product; pharmacy designated to receive the drug (iv) A record of drug sample thefts or (3) A receipt is signed by the sample; the name, address, professional significant losses reported by the recipient, as set forth in paragraph (c) of title, and signature of the person representative since the most recently this section, when the drug sample is acknowledging delivery of the drug completed prior inventory, including delivered; sample; the proprietary or established the approximate date of the occurrence (4) The receipt is returned to the name and strength of the drug sample; and the proprietary or established name, manufacturer or distributor; and the quantity of the drug sample dosage strength, and number of sample (5) The requirements of paragraphs (d) delivered; and the date of the delivery. units stolen or lost; and through (e) of this section are met. (d) Inventory and reconciliation of (v) A record summarizing the (b) Contents of the written request drug samples of manufacturers’ and information required by paragraphs forms for delivery of samples by a distributors’ representatives. Each drug (d)(2)(ii) through (d)(2)(iv) of this representative. (1) A written request for manufacturer or authorized distributor section. The record must show, for each delivery of a drug sample by a of record that distributes drug samples type of sample unit (i.e., sample units representative to a licensed practitioner by means of representatives shall having the same established or is required to contain the following: conduct, at least annually, a complete proprietary name and dosage strength), (i) The name, address, professional and accurate physical inventory of all the total number of sample units title, and signature of the practitioner drug samples. All drug samples in the received, distributed, lost, or stolen making the request; possession or control of each since the most recently completed prior (ii) The practitioner’s State license or manufacturer’s and distributor’s inventory. For example, a typical entry authorization number, or, where a representatives are required to be in this record may read ‘‘50 units scheduled drug product is requested, inventoried and the results of the risperidone (1 mg) returned to the practitioner’s Drug Enforcement inventory are required to be recorded in manufacturer’’ or simply ‘‘Risperidone Administration number; an inventory record, as specified in (1 mg)/50/returned to manufacturer.’’ (iii) The proprietary or established paragraph (d)(1) of this section. In (3) Each drug manufacturer or name and the strength of the drug addition, manufacturers and distributors authorized distributor of record shall sample requested; shall reconcile the results of the take appropriate internal control (iv) The quantity requested; physical inventory with the most measures to guard against error and (v) The name of the manufacturer and recently completed prior physical possible fraud in the conduct of the the authorized distributor of record, if inventory and create a report physical inventory and reconciliation, the drug sample is requested from an documenting the reconciliation process, and in the preparation of the inventory authorized distributor of record; and as specified in paragraph (d)(2) of this record and reconciliation report. (vi) The date of the request. section. (4) A manufacturer or authorized (2) A written request for delivery of a (1) The inventory record is required to distributor of record shall carefully drug sample by a representative to the identify all drug samples in a evaluate any apparent discrepancy or pharmacy of a hospital or other health representative’s stock by the proprietary significant loss revealed through the care entity is required to contain, in or established name, dosage strength, inventory and reconciliation process addition to all of the information in and number of units. and shall fully investigate any such paragraph (b) of this section, the name (2) The reconciliation report is discrepancy or significant loss that and address of the pharmacy of the required to include: cannot be justified.

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(e) Lists of manufacturers’ and cause audits of sales representatives by (2) Immediately initiate an distributors’ representatives. Each drug personnel independent of the sales investigation; and manufacturer or authorized distributor force; and (3) Provide FDA with a complete of record who distributes drug samples (4) Storage of drug samples by written report, including the reason for by means of representatives shall representatives; and the results of the investigation, not maintain a list of the names and (c) Identifying any significant loss of later than 30 days after the date of the addresses of its representatives who drug samples and notifying FDA of the initial notification in paragraph (a)(1) of distribute drug samples and of the sites loss; and this section. where drug samples are stored. (d) Monitoring any loss or theft of (b) Significant loss or known theft of drug samples. drug samples. A manufacturer or § 203.32 Drug sample storage and § 203.35 Standing requests. authorized distributor of record that handling requirements. distributes drug samples or a charitable (a) Storage and handling conditions. Manufacturers or authorized institution that receives donated drug Manufacturers, authorized distributors distributors of record shall not samples from a licensed practitioner distribute drug samples on the basis of of record, and their representatives shall shall: store and handle all drug samples under open-ended or standing requests, but (1) Notify FDA, by telephone or in conditions that will maintain their shall require separate written requests writing, within 5 working days of stability, integrity, and effectiveness and for each drug sample or group of becoming aware of a significant loss or ensure that the drug samples are free of samples. An arrangement by which a known theft; contamination, deterioration, and licensed practitioner requests in writing (2) Immediately initiate an adulteration. that a specified number of drug samples investigation into the significant loss or (b) Compliance with compendial and be delivered over a period of not more known theft; and labeling requirements. Manufacturers, than 6 months, with the actual delivery (3) Provide FDA with a complete authorized distributors of record, and dates for parts of the order to be set by written report, including the reason for their representatives can generally subsequent oral communication or and the results of the investigation, not comply with this section by following electronic transmission, is not later than 30 days after the date of the the compendial and labeling considered to be a standing request. initial notification in paragraph (b)(1) of requirements for storage and handling of § 203.36 Fulfillment houses, shipping and this section. a particular prescription drug in mailing services, comarketing agreements, (c) Conviction of a representative. handling samples of that drug. and third-party recordkeeping. (1) A manufacturer or authorized (a) Responsibility for creating and distributor of record that distributes § 203.33 Drug sample forms. maintaining forms, reports, and records. drug samples shall notify FDA, by A sample request or receipt form may Any manufacturer or authorized telephone or in writing, within 30 days be delivered by mail, common carrier, distributor of record that uses a of becoming aware of the conviction of or private courier or may be transmitted fulfillment house, shipping or mailing one or more of its representatives for a photographically or electronically (i.e., service, or other third party, or engages violation of section 503(c)(1) of the act by telephoto, wirephoto, radiophoto, in a comarketing agreement with or any State law involving the sale, facsimile transmission (FAX), another manufacturer or distributor to purchase, or trade of a drug sample or xerography, or electronic data transfer) distribute drug samples or to meet any the offer to sell, purchase, or trade a or by any other system, provided that of the requirements of PDMA, PDA, or drug sample. the method for transmission meets the this part, remains responsible for (2) A manufacturer or authorized security requirements set forth in creating and maintaining all requests, distributor of record shall provide FDA § 203.60(c). receipts, forms, reports, and records with a complete written report not later required under PDMA, PDA, and this than 30 days after the date of the initial § 203.34 Policies and procedures; notification. administrative systems. part. (b) Responsibility for producing (d) Selection of individual responsible Each manufacturer or authorized requested forms, reports, or records. A for drug sample information. A distributor of record that distributes manufacturer or authorized distributor manufacturer or authorized distributor drug samples shall establish, maintain, of record that contracts with a third of record that distributes drug samples and adhere to written policies and party to maintain some or all of its shall inform FDA in writing within 30 procedures describing its administrative records shall produce requested forms, days of selecting the individual systems for the following: reports, records, or other required responsible for responding to a request (a) Distributing drug samples by mail documents within 2 business days of a for information about drug samples of or common carrier, including request by an authorized representative that individual’s name, business methodology for reconciliation of of FDA or another Federal, State, or address, and telephone number. requests and receipts; (e) Whom to notify at FDA. local regulatory or law enforcement (b) Distributing drug samples by Notifications and reports concerning official. means other than mail or common prescription human drugs shall be made carrier including the methodology for: § 203.37 Investigation and notification to the Division of Prescription Drug (1) Reconciling requests and receipts, requirements. Compliance and Surveillance (HFD– identifying patterns of nonresponse, and (a) Investigation of falsification of 330), Office of Compliance, Center for the manufacturer’s or distributor’s drug sample records. A manufacturer or Drug Evaluation and Research, Food response when such patterns are found; authorized distributor of record that has and Drug Administration, 7520 Standish (2) Conducting the annual physical reason to believe that any person has Pl., Rockville, MD 20855. Notifications inventory and preparation of the falsified drug sample requests, receipts, and reports concerning prescription reconciliation report; or records, or is diverting drug samples, human biological products shall be (3) Implementing a sample shall: made to the Division of Inspections and distribution security and audit system, (1) Notify FDA, by telephone or in Surveillance (HFM–650), Office of including conducting random and for- writing, within 5 working days; Compliance, Center for Biologics

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Evaluation and Research, Food and delivery by a licensed practitioner or an problems shall be investigated by the Drug Administration, 1401 Rockville agent or employee of the donating charitable institution and reported to Pike, Rockville, MD 20852. charitable institution. Donated drug FDA. samples shall be placed by the donor in (h) A recipient charitable institution § 203.38 Sample lot or control numbers; a sealed carton for delivery to or shall store drug samples under labeling of sample units. collection by the recipient charitable conditions that will maintain the (a) Lot or control number required on institution. sample’s stability, integrity, and drug sample labeling and sample unit (c) A donated drug sample shall not effectiveness, and will ensure that the label. The manufacturer or authorized be dispensed to a patient or be drug samples will be free of distributor of record of a drug sample distributed to another charitable contamination, deterioration, and shall include on the label of the sample institution until it has been examined adulteration. unit and on the outside container or by a licensed practitioner or registered (i) A charitable institution shall notify packaging of the sample unit, if any, an pharmacist at the recipient charitable FDA within 5 working days of becoming identifying lot or control number that institution to confirm that the donation aware of a significant loss or known will permit the tracking of the record accurately describes the drug theft of prescription drug samples. distribution of each drug sample unit. sample delivered and that no drug (b) Records containing lot or control sample is adulterated or misbranded for Subpart EÐWholesale Distribution numbers required for all drug samples any reason, including, but not limited distributed. A manufacturer or § 203.50 Requirements for wholesale to, the following: distribution of prescription drugs. authorized distributor of record shall (1) The drug sample is out of date; maintain for all samples distributed (2) The labeling has become (a) Identifying statement for sales by records of drug sample distribution mutilated, obscured, or detached from unauthorized distributors. Before the containing lot or control numbers that the drug sample packaging; completion of any wholesale are sufficient to permit the tracking of (3) The drug sample shows evidence distribution by a wholesale distributor sample units to the point of the licensed of having been stored or shipped under of a prescription drug for which the practitioner. conditions that might adversely affect seller is not an authorized distributor of (c) Labels of sample units. Each its stability, integrity, or effectiveness; record to another wholesale distributor sample unit shall bear a label that (4) The drug sample is for a or retail pharmacy, the seller shall clearly denotes its status as a drug prescription drug product that has been provide to the purchaser a statement sample, e.g., ‘‘sample,’’ ‘‘not for sale,’’ recalled or is no longer marketed; or identifying each prior sale, purchase, or ‘‘professional courtesy package.’’ (5) The drug sample is otherwise trade of such drug. This identifying (1) A drug that is labeled as a drug possibly contaminated, deteriorated, or statement shall include: sample is deemed to be a drug sample adulterated. (1) The proprietary and established within the meaning of the act. (d) The recipient charitable institution name of the drug; (2) A drug product dosage unit that shall dispose of any drug sample found (2) Dosage; bears an imprint identifying the dosage to be unsuitable by destroying it or by (3) Container size; form as a drug sample is deemed to be returning it to the manufacturer. The (4) Number of containers; a drug sample within the meaning of the charitable institution shall maintain (5) The drug’s lot or control act. complete records of the disposition of number(s); (3) Notwithstanding paragraphs (c)(1) all destroyed or returned drug samples. (6) The business name and address of and (c)(2) of this section, any article that (e) The recipient charitable institution all parties to each prior transaction is a drug sample as defined in section shall prepare at the time of collection or involving the drug, starting with the 503(c)(1) of the act and § 203.3(i) that delivery of a drug sample a complete manufacturer; and fails to bear the label required in this and accurate donation record, a copy of (7) The date of each previous paragraph (c) is a drug sample. which shall be retained by the recipient transaction. charitable institution for at least 3 years, (b) The drug origin statement is § 203.39 Donation of drug samples to containing the following information: subject to the record retention charitable institutions. (1) The name, address, and telephone requirements of § 203.60 and must be A charitable institution may receive a number of the licensed practitioner (or retained by all wholesale distributors drug sample donated by a licensed donating charitable institution); involved in the distribution of the drug practitioner or another charitable (2) The manufacturer, brand name, product, whether authorized or institution for dispensing to a patient of quantity, and lot or control number of unauthorized, for 3 years. the charitable institution, or donate a the drug sample donated; and (c) Identifying statement not required drug sample to another charitable (3) The date of the donation. when additional manufacturing institution for dispensing to its patients, (f) Each recipient charitable processes are completed. A provided that the following institution shall maintain complete and manufacturer that subjects a drug to any requirements are met: accurate records of donation, receipt, additional manufacturing processes to (a) A drug sample donated by a inspection, inventory, dispensing, produce a different drug is not required licensed practitioner or donating redistribution, destruction, and returns to provide to a purchaser a statement charitable institution shall be received sufficient for complete accountability identifying the previous sales of the by a charitable institution in its original, and auditing of drug sample stocks. component drug or drugs. unopened packaging with its labeling (g) Each recipient charitable (d) List of authorized distributors of intact. institution shall conduct, at least record. Each manufacturer shall (b) Delivery of a donated drug sample annually, an inventory of prescription maintain at the corporate offices a to a recipient charitable institution shall drug sample stocks and shall prepare a current written list of all authorized be completed by mail or common report reconciling the results of each distributors of record. carrier, collection by an authorized inventory with the most recent prior (1) Each manufacturer’s list of agent or employee of the recipient inventory. Drug sample inventory authorized distributors of record shall charitable institution, or personal discrepancies and reconciliation specify whether each distributor listed

VerDate 29-OCT-99 09:33 Dec 02, 1999 Jkt 190000 PO 00000 Frm 00069 Fmt 4700 Sfmt 4700 E:\FR\FM\A03DE0.001 pfrm02 PsN: 03DER1 67762 Federal Register / Vol. 64, No. 232 / Friday, December 3, 1999 / Rules and Regulations thereon is authorized to distribute the photocopies or microfiche), provided the sale, purchase, or trade of a drug manufacturer’s full product line or only that the security and authentication sample, or the offer to sell, purchase, or particular, specified products. requirements described in paragraph (c) trade a drug sample, in violation of (2) Each manufacturer shall update its of this section are followed. Where a section 503(c)(1) of the act, is entitled to list of authorized distributors of record required document is created on paper one-half the criminal fine imposed and on a continuing basis. and electronically scanned into a collected for such violation, but not (3) Each manufacturer shall make its computer, the resulting record is an more than $125,000. list of authorized distributors of record electronic record that must meet the (b) Procedure for making application available on request to the public for requirements of part 11 of this chapter. for a reward for providing information inspection or copying. A manufacturer (c) Security and authentication leading to the institution of a criminal may impose reasonable copying charges requirements for request and receipt proceeding against, and conviction of, a for such requests from members of the forms, reports, records, and other person for the sale, purchase, or trade public. documents created on paper. A request of a drug sample. A person who or receipt form, report, record, or other provides information leading to the Subpart FÐRequest and Receipt document, and any signature appearing institution of a criminal proceeding Forms, Reports, and Records thereon, that is created on paper and against, and conviction of, a person for § 203.60 Request and receipt forms, that is maintained by photographic the sale, purchase, or trade of a drug reports, and records. imaging, or transmitted electronically sample, or the offer to sell, purchase, or trade a drug sample, in violation of (a) Use of electronic records, (i.e., by facsimile) shall be maintained section 503(c)(1) of the act, may apply electronic signatures, and handwritten or transmitted in a form that provides for a reward by making written signatures executed to electronic reasonable assurance of being: (1) Resistant to tampering, revision, application to: records. modification, fraud, unauthorized use, (1) Director, Office of Compliance (1) Provided the requirements of part or alteration; (HFD–300), Center for Drug Evaluation 11 of this chapter are met, electronic (2) Preserved in accessible and and Research, Food and Drug records, electronic signatures, and retrievable fashion; and Administration, 7500 Standish Pl., handwritten signatures executed to (3) Available to permit copying for Rockville, MD 20855; or electronic records may be used as an purposes of review, analysis, (2) Director, Office of Compliance and alternative to paper records and verification, authentication, and Biologics Quality (HFM–600), Center for handwritten signatures executed on reproduction by the person who Biologics Evaluation and Research, paper to meet any of the record and executed the form or created the record, Food and Drug Administration, 1401 signature requirements of PDMA, PDA, by the manufacturer or distributor, and Rockville Pike, Rockville, MD 20852, as or this part. by authorized personnel of FDA and appropriate. (2) Combinations of paper records and other regulatory and law enforcement electronic records, electronic records agencies. PART 205ÐGUIDELINES FOR STATE and handwritten signatures executed on (d) Retention of request and receipt LICENSING OF WHOLESALE paper, or paper records and electronic forms, reports, lists, records, and other PRESCRIPTION DRUG DISTRIBUTORS signatures or handwritten signatures documents. Any person required to executed to electronic records, may be 2. The authority citation for 21 CFR create or maintain reports, lists, or other part 205 continues to read as follows: used to meet any of the record and records under PDMA, PDA, or this part, signature requirements of PDMA, PDA, including records relating to the Authority: 21 U.S.C. 351, 352, 353, 371, or this part, provided that: distribution of drug samples, shall 374. (i) The requirements of part 11 of this retain them for at least 3 years after the 3. Section 205.3 is amended by chapter are met for the electronic date of their creation. adding paragraphs (f)(9), (f)(10), and (h) records, electronic signatures, or (e) Availability of request and receipt to read as follows: handwritten signatures executed to forms, reports, lists, and records. Any § 205.3 Definitions. electronic records; and person required to create or maintain (ii) A reasonably secure link between request and receipt forms, reports, lists, * * * * * the paper-based and electronic or other records under PDMA, PDA, or (f) * * * components exists such that the this part shall make them available, (9) Drug returns, when conducted by combined records and signatures are upon request, in a form that permits a hospital, health care entity, or trustworthy and reliable, and to ensure copying or other means of duplication, charitable institution in accordance that the signer cannot readily repudiate to FDA or other Federal, State, or local with § 203.23 of this chapter; or (10) The sale of minimal quantities of the signed records as not genuine. regulatory and law enforcement officials drugs by retail pharmacies to licensed (3) For the purposes of this paragraph for review and reproduction. The practitioners for office use. (a), the phrase ‘‘record and signature records shall be made available within requirements of PDMA, PDA, or this 2 business days of a request. * * * * * part’’ includes drug sample request and (h) Health care entity means any receipt forms, reports, records, and Subpart GÐRewards person that provides diagnostic, other documents, and their associated medical, surgical, or dental treatment, or signatures required by PDMA, PDA, and § 203.70 Application for a reward. chronic or rehabilitative care, but does this part. (a) Reward for providing information not include any retail pharmacy or any (b) Maintenance of request and leading to the institution of a criminal wholesale distributor. A person cannot receipt forms, reports, records, and proceeding against, and conviction of, a simultaneously be a ‘‘health care entity’’ other documents created on paper. person for the sale, purchase, or trade and a retail pharmacy or wholesale Request and receipt forms, reports, of a drug sample. A person who distributor. records, and other documents created provides information leading to the 4. Section 205.50 is amended by on paper may be maintained on paper institution of a criminal proceeding revising paragraph (f)(2) to read as or by photographic imaging (i.e., against, and conviction of, a person for follows:

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§ 205.50 Minimum requirements for the ACTION: Final regulations. qualify for the estate tax charitable storage and handling of prescription drugs deduction. and for the establishment and maintenance SUMMARY: This document contains final of prescription drug distribution records. regulations relating to the effect of Several commentators stated that the distinction between estate transmission * * * * * certain administration expenses on the (f) * * * valuation of property that qualifies for expenses and estate management (2) Inventories and records shall be either the estate tax marital deduction expenses was not clearly made in the made available for inspection and under section 2056 of the Internal proposed regulations and requested photocopying by authorized Federal, Revenue Code or the estate tax more concrete definitions of each type State, or local law enforcement agency charitable deduction under section of expense. In response to these officials for a period of 3 years after the 2055. The regulations distinguish comments, the final regulations date of their creation. between estate transmission expenses, characterize estate transmission which reduce the value of property for expenses as those expenses that would Dated: August 3, 1999. not have been incurred except for the Margaret M. Dotzel, marital and charitable deduction purposes, and estate management decedent’s death. Although the amount Acting Associate Commissioner for Policy. expenses, which generally do not of these expenses cannot be calculated [FR Doc. 99–30954 Filed 11–30–99; 12:38 reduce the value of property for these with any degree of certainty on the date pm] purposes. of the decedent’s death, they are BILLING CODE 4160±01±F expenses that are incurred because of EFFECTIVE DATES: These regulations are effective on December 3, 1999. the decedent’s death. Estate management expenses, on the other FOR FURTHER INFORMATION CONTACT: DEPARTMENT OF THE TREASURY hand, are characterized in the final Deborah Ryan, (202) 622–3090 (not a regulations as expenses that would be toll-free number). Internal Revenue Service incurred with respect to the property SUPPLEMENTARY INFORMATION: 26 CFR Part 1 even if the decedent had not died; that Background is, expenses incurred in investing, Determination of Tax Liability maintaining, and preserving the On December 16, 1998, the Treasury property. These are expenses that CFR Correction Department and the IRS published in typically would have been incurred the Federal Register (63 FR 69248) a In Title 26 of the Code of Federal with respect to the property by the Regulations, part 1 (§ § 1.641 to 1.850), notice of proposed rulemaking (REG– 114663–97) relating to the effect of decedent before death or by the revised as of April 1, 1999, page 293, in beneficiaries had they received the § 1.704–-1 (b)(0), in the table in the first certain administration expenses on the valuation of property which qualifies for property on the date of death without column, under ‘‘Section’’ the first, any intervening period of second, fourth and fifth lines the estate tax marital or charitable deduction. The proposed regulations administration. In order to be certain respectively should read, 1.704–1(b)(0), that all expenses are classified as either 1.704–1(b)(1), 1.704-1 (b)(1)(ii) and were issued in response to the decision transmission expenses or management 1.704–1(b)(1)(iii). of the Supreme Court of the United expenses, transmission expenses are Also, in the second column, under States in Commissioner v. Estate of ‘‘Heading’’ ‘‘Maintenance of capital Hubert, 520 U.S. 93 (1997) (1997–2 C.B. defined to include all expenses that are accounts’’ make the following changes 231). Written comments responding to not management expenses. in the second column of the table: the notice of proposed rulemaking were Three commentators stated that the 1.704–1(b)(2)(d)(2) should read 1.704– received, and a public hearing was held different treatment accorded to estate 1(b)(2)(iv)(d)(2) on April 21, 1999, at which time oral transmission expenses and estate 1.704–1(b)(2)(iv)(3) should read testimony was presented. This Treasury management expenses under the 1.704–1(b)(2)(iv)(d)(3) decision adopts final regulations with proposed regulations creates a new 1.704–1(2)(iv)(e)(1) should read respect to the notice of proposed federal standard for allocating expenses 1.704–1(b)(2)(iv)(e)(1) rulemaking. A summary of the principal that may be contrary to the manner in 1.704–1(b)(2)(e)(2) should read 1.704– comments received and revisions made which the expenses must be charged 1(b)(2)(iv)(e)(2) in response to those comments is under state law. However, the Treasury [FR Doc. 99–55540 Filed 12–2–99; 8:45 am] provided below. and the IRS believe that the allocation of administration expenses based on the BILLING CODE 1505±01±D The proposed regulations set forth the substantive provisions as applied to the distinction between transmission and estate tax marital deduction in management expenses provides the DEPARTMENT OF THE TREASURY § 20.2056(b)–4(a). For the estate tax most accurate measure of the value of charitable deduction, the proposed the property which passes to the Internal Revenue Service regulations (under § 20.2055–1(d)(6)) surviving spouse or to the charity at the merely cross-reference the rules for the moment of the decedent’s death for 26 CFR Part 20 marital deduction. federal estate tax marital and charitable [TD 8846] Several commentators suggested that deduction purposes. Transmission the regulations under section 2055 expenses that are charged to the RIN 1545±AV45 should contain specific rules relating to property passing to the surviving spouse Deductions for Transfers for Public, the charitable deduction, rather than or to the charity reduce the amount of Charitable, and Religious Uses; In just a cross-reference. The Treasury and that property as of the date of the General Marital Deduction; Valuation the IRS agree with this suggestion. The decedent’s death because the expenses, of Interest Passing to Surviving final regulations contain rules under as well as the transfer to the surviving Spouse § 20.2055–3 specifically addressing the spouse or to charity, are a consequence effect of administration expenses on the of, and arise as a result of, the AGENCY: Internal Revenue Service (IRS), valuation of property when all or a decedent’s death. In contrast, Treasury. portion of the interests in property management expenses do not generally

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