In June 2024, the U.S. Food and Drug Administration ("FDA") clarified, with respect to the Drug Supply Chain Security Act (“DSCSA”)[1], that it will not extend the one-year stabilization period for the enhanced drug distribution requirements beyond November 27, 2024.[2]

At the same time, the FDA also issued exemptions, through November 27, 2026, for small pharmacies from certain DSCSA requirements, and is allowing all other trading partners to request waivers or exemptions from the enhanced drug distribution security requirements.[3]

DSCSA Background

The DSCSA provides for the tracking and tracing of drug products from drug manufacturers through the supply chain down to dispensers, requirements for investigating and dispositioning suspect and illegitimate drug products and federal licensing requirements for wholesalers and third-party logistics providers. The driving force behind the DSCSA is to prevent counterfeit drugs from entering the supply chain and to prevent such drugs from harming patients if they do enter the supply chain. Under the law, manufacturers, repackagers, wholesale distributors, third-party logistics providers, and dispensers (“Trading Partners”) each have affirmative obligations governing how they must transfer ownership of prescription drug products and the specific product data or tracking data that must be maintained and shared between buyers and sellers of such products. Further, Trading Partners must have processes in place for drug product verification, as well as an affirmative obligation to identify, investigate and manage suspect or illegitimate products, such as counterfeit or intentionally adulterated products.

DSCSA Enhanced Drug Distribution Security Requirements

The intended culmination of the staggered implementation of the DSCSA was the November 27, 2023, effective date for Enhanced Drug Distribution Security (EDDS) requirements.[4] The EDDS provisions require Trading Partners to exchange drug-tracing information using an interoperable electronic system that allows product tracing at the package level with unique product identifiers. More specifically, as of November 27, 2023, Trading Partners must:

1. Use secure, interoperable, electronic approaches to exchange transaction information, which must include package-level product identifiers for each package included in the transaction, and to exchange transaction statements;
2. Have systems and processes in place to verify products at the package level;
3. Have systems and processes in place to promptly respond with the transaction information and transaction statement for a product upon a request by the Secretary, or other appropriate Federal or State official, in the event of a recall or for investigations of suspect or illegitimate product;
4. Have systems and processes in place to facilitate the gathering of information needed to produce the transaction information for a product going back to the manufacturer, as applicable, in the event of a request by the Secretary, or other appropriate Federal or State official, on account of a recall or for suspect or illegitimate product investigations, or in the event of a request by an authorized trading partner (in a secure manner that protects confidential commercial information and trade secrets) for purposes of investigating a suspect product or assisting with such a governmental request; and
5. Have systems and processes in place to accept saleable returns under appropriate conditions, i.e., being able to associate the saleable return product with the transaction information and transaction statement associated with that product.[5]

2023 Compliance Policy

Recognizing that many Trading Partners were not yet ready to fully comply with the November 27, 2023 deadline, in August 2023, FDA issued a compliance policy guidance document with regard to EDDS.[6] This guidance document provided Trading Partners with a one-year “stabilization period”, through November 27, 2024, during which FDA would not enforce the five EDDS requirements above.[7] The stabilization period was implemented to avoid supply chain disruption and to ensure continued patient access to prescription drug products, while Trading Partners continue to work towards compliance with the EDDS requirements.

Unlike prior compliance policies issued by FDA, the regulator was clear that this policy was not being implemented to justify delayed efforts to comply with the DSCSA. Rather, this policy was implemented to provide “clarity and flexibility to trading partners to help ensure continued patient access to prescription drugs as the supply chain transitions to the interoperable, electronic product tracing at the package level under the DSCSA.”[8] FDA strongly encouraged Trading Partners to continue their compliance efforts with EDDS and indicated that it would be monitoring trading partner readiness through the stabilization period.[9] The FDA also hinted at further flexibility following the stabilization period, noting that FDA has the authority to grant exemptions from certain DSCSA requirements, even after the stabilization period ends.[10]

2024 Small Dispenser Exemptions

With the end of the stabilization period approaching and continued concerns from small dispensers “related to the time, costs, and resources needed to further develop the robust technologies and processes to enable data exchange, establish business relationships with their trading partners, and operationalize business practices”, FDA published a letter on June 12, 2024, exempting small dispensers from the five EDDS requirements for an additional two years, as well as exempting them from the DSCSA requirement, with regard to suspect product, to verify the product identifier of statutorily specified quantities of that product.[11]

For purposes of this exemption, a small dispenser is defined as a corporate entity, owning a dispenser, which has 25 or fewer full-time employee licensed pharmacists or pharmacy technicians.[12] The FDA letter expressly provides that the employee total is measured as of November 27, 2024, which could mean that once a dispenser is exempt as of that date, they are exempt for the entire two-year period even if their employee numbers grow. [13] On the other hand if a pharmacy is not exempt as of that date and its employee numbers contract during that time, that pharmacy may not be eligible for the exemption. There are several other scenarios, which the FDA similarly failed to address. The FDA does not address the employee calculation as to new pharmacies that may open after November 27, 2024, or situations where a pharmacy is sold after November 27, 2024, to a new corporate entity, whether through an equity sale or asset sale. Moreover, since the FDA references only corporate entities, it is also silent as to sole proprietorship scenarios.

During the two-year exemption period, small dispensers will be exempt from:

1. The requirement to exchange transaction information and transaction statements in a secure, interoperable, electronic manner.
2. The requirement that the transaction information include the product identifier at the package level.
3. The requirement to have systems and processes to verify product at the package level.
4. The requirement to have systems and processes necessary to promptly respond with the transaction information and transaction statement upon a regulator’s request, for recall purposes or for purposes of a suspect or illegitimate product investigation.
5. The requirement to have systems and processes needed to promptly facilitate the gathering of information needed to produce the transaction information for each transaction going back to the manufacturer, as requested by a regulator or an authorized Trading Partner.[14]

FDA once again emphasized that these exemptions should not be used to justify delay with compliance.[15] 

Exemptions for Other Trading Partners

Trading Partners that do not qualify for the small dispenser exemption, but who assert that they are unable to fully comply with the EDDS requirements, may still apply for a waiver or exemption from the EDDS requirements.[16] Timing is critical for these requests. FDA recommends that requests be submitted by August 1, 2024, and even so, does not guarantee that it will grant or deny the request by November 27, 2024.[17] FDA further states that a Trading Partner’s obligation to comply with EDDS requirements does not pause upon submission of an exemption or waiver request.[18] These FDA statements and timing issues will likely create significant stress and uncertainty for some Trading Partners in the coming months as they await a FDA response to a waiver or exemption request with a looming deadline. It is unclear what, if any, options a Trading Partner has who does not believe that it can comply by November 27, 2024, and either does not receive an FDA decision by that time or is denied by the FDA. A cessation of operations, even if temporary, by a Trading Partner will have obvious negative patient access impacts. It is also apparent that any new Trading Partner entering the supply chain in the future will need to be sure to be ready to be fully compliant with the DSCSA in advance of commencing business operations, or, if not ready, will need to apply for an exemption or waiver, as needed, in advance of starting operations.

The FDA previously published guidance outlining how to request waivers and exemptions, which should be consulted for purposes of seeking an EDDS waiver or exemption.[19] Apparently, the FDA has already received numerous waiver and exemption requests and notes that the following information has been helpful in ruling upon a request:

• Steps that have been completed to implement the EDDS requirements for which the waiver or exemption is being sought
• Explanation detailing why additional time is needed 
• Steps that will be taken to fully implement requirements 
• Number of full-time employees employed by the trading partner seeking the waiver or exemption 
• Identity of the manufacturer who holds the approved application(s) for the product(s) involved, if a co-licensed partner or affiliate submits a waiver or exemption request[20]

Reading into the above information categories, the FDA seems more likely to grant a waiver or exemption where the Trading Partner can show strong effort or good faith towards compliance with the EDDS requirements. Additionally, it seems that the FDA is going to disfavor exemption and waiver requests from larger Trading Partners. The FDA will review granted waivers or exemptions every two years if they do not expire earlier.[21]

Matthew Mariani, a Summer Associate in Epstein Becker Green’s Washington, DC, office (not admitted to practice) contributed to the preparation of this piece.

ENDNOTES

[1] Drug Supply Chain Security Act, 21 U.S.C. § 360eee et seq.

[2] U.S. Food and Drug Admin., Drug Supply Chain Security Act, Waivers and Exemptions Beyond the Stabilization Period (July 17, 2024), https://www.fda.gov/drugs/drug-supply-chain-security-act-dscsa/waivers-and-exemptions-beyond-stabilization-period.

[3] U.S. Food and Drug Admin., DSCSA Exemptions from Certain Requirements Under Section 582 of the FD&C Act for Small Business Dispensers (revised with clarifying edits to June 12, 2024, letter) (July 12, 2024), https://www.fda.gov/media/179256/download?attachment.

[4] Drug Supply Chain Security Act, 21 U.S.C. 360eee-1(g).

[5] Drug Supply Chain Security Act, 21 U.S.C. 360eee-1(g)(1)(A)-(F).

[6] U.S. Food and Drug Admin., Enhanced Drug Distribution Security Requirements Under Section 582(g)(1) of the Federal Food, Drug, and Cosmetic Act — Compliance Policies Guidance for Industry (August 2023), https://www.fda.gov/media/171592/download.

[7] Id. at 5.

[8] Id. at 4.

[9] Id. at 5.

[10] Id.

[11] U.S. Food and Drug Admin., DSCSA Exemptions from Certain Requirements Under Section 582 of the FD&C Act for Small Business Dispensers (revised with clarifying edits to June 12, 2024, letter) (July 12, 2024), https://www.fda.gov/media/179256/download?attachment.

[12] Id. at 2.

[13] Id. at 2 n. 7.

[14] Id. at 2.

[15] Id. at 3.

[16] U.S. Food and Drug Admin., Waivers and Exemptions Beyond the Stabilization Period (July 17, 2024), https://www.fda.gov/drugs/drug-supply-chain-security-act-dscsa/waivers-and-exemptions-beyond-stabilization-period.

[17] Id.

[18] Id.

[19] U.S. Food and Drug Admin., Waivers, Exceptions, and Exemptions From the Requirements of Section 582 of the Federal Food, Drug, and Cosmetic Act Guidance for Industry (August 2023), https://www.fda.gov/media/113342/download.

[20] U.S. Food and Drug Admin., Waivers and Exemptions Beyond the Stabilization Period.

[21] U.S. Food and Drug Admin., Waivers, Exceptions, and Exemptions From the Requirements of Section 582 of the Federal Food, Drug, and Cosmetic Act Guidance for Industry at 9 (August 2023), https://www.fda.gov/media/113342/download.