FDA Proposes National Standards for Wholesale Drug Distributors and Third-Party Logistics Providers

April 15, 2022

The U.S. Food and Drug Administration (FDA) is accepting comment until June 6, 2022, on its proposed rule, National Standards for the Licensure of Wholesale Drug Distributors and Third-Party Logistics Providers. FDA issued the rule in February 2022 in furtherance of its mandate under the Drug Supply Chain Security Act, Title II of the Drug Quality and Security Act, which, in part, requires FDA to establish national licensure standards for wholesale distributors and third-party logistics providers (3PLs), entities that provide or coordinate logistics services but do not take ownership of the product or have responsibility to direct the sale or disposition of the product.

If enacted, the rule would replace 21 CFR § 205, which provides guidelines for state licensing of wholesale prescription drug distributors, and would create an entirely new regulatory system for wholesale drug distributors and 3PLs. Of note, under the rule, 3PLs would not be regulated as wholesale distributors and would instead be regulated as separate members of the drug supply chain. This change could present significant compliance challenges for any 3PLs.

Currently, state and local governments independently license and regulate wholesale drug distributors and 3PLs. Per FDA, this has created a “patchwork system” of regulation that is inconsistent across states. The proposed rule would revise FDA’s interpretation of section 585(b)(1) of the Federal Food, Drug, and Cosmetic Act, and once effective, the rule would preempt state and local licensure requirements for wholesale drug distributors and 3PLs. Accordingly, state and local governments would not be allowed to establish or continue licensure requirements, unless those requirements are at least identical to federal requirements.

According to FDA, the proposed national regulatory system “would provide clarity and consistency for wholesale distributors and third-party logistics providers seeking licensure” and reduce diversion of prescription drugs, as only distributors and providers licensed under the new federal standards would be able to “engage in transactions related to the sale and distribution of certain prescription drugs with other members of the supply chain.” FDA highlighted that theft and diversion of prescription drugs has become a significant concern for the agency, and a national regulatory system would help combat this problem.

The proposed rule includes provisions and requirements addressing the following:

  1. Licensure application, including surety bond requirements.
  2. Notice for changes to information or ownership.
  3. Procedures surrounding prelicensure inspection.
  4. Procedures surrounding denial, revocation and suspension of licenses.
  5. Standards for the storage and handling of prescription drugs, including specific requirements for cleanliness, lighting, temperature and security.
  6. Personnel requirements and qualifications, including education, experience and training.
  7. Recordkeeping and document maintenance.
  8. Written policy and procedures.

States, approved organizations, FDA, wholesale drug distributors and 3PLs likely will face new costs if the rule is finalized. In part, costs to wholesale distributors and 3PLs would stem from understanding and implementing the new requirements, reporting to FDA, undergoing routine inspections, writing and revising standard operating procedures, and conducting background checks. FDA recently posted a webinar providing more details on the proposed rule and will accept comments on the rule through June 6, 2022.

Entities that would be impacted by this rule should closely monitor FDA’s response to comments and should confer with counsel to proactively evaluate compliance obligations under the rule to prepare for upcoming changes.