On October 9, 2024, the Food and Drug Administration (“FDA”) issued a document that provides exemptions to the enhanced drug distribution security requirements (enhanced requirements) required by section 582(g) of the Food, Drug, and Cosmetic Act (FDCA). Section 582(g) is part of the Drug Supply Chain Security Act (DSCSA) and requires significant new tracking electronic data transfer requirements for various “trading partners” in the drug supply chain. It was scheduled to go into effect on November 27, 2024, but due to potential severe disruptions to the drug supply chain, FDA has opted to issue broad exemptions that will delay enforcement of the enhanced requirements for up to one additional year. See here for Quarles’ previous coverage on DSCSA matters.
Background
The DSCSA enhanced requirements are designed to (among other things) increase drug supply chain security through electronic transfer of drug information between the various “Trading Partners” involved in drug distribution (e.g., manufacturers, wholesale distributors, dispensers, and repackagers). The enhanced requirements were originally scheduled to go into effect 10 years after enactment of the DSCSA, which would have been November 27, 2023. FDA determined that the drug distribution system was not prepared to implement the enhanced requirements at that time and allowed a one-year extension (which the FDA called a “stabilization period”) to let various supply chain entities come into compliance. We discussed the stabilization period in an earlier alert found here. Despite the one-year extension, many supply chain entities were having difficulty in coming into compliance with the enhanced requirements. There were significant problems with the transfer of electronic data between various Trading Partners, and these problems were raised with FDA. Pharmaceutical industry members told FDA officials that if the enhanced requirements were fully implemented on November 27, 2024, that there was a significant likelihood of serious pharmaceutical supply chain disruptions, which could result in drug shortages of critical medications.
Exemptions
In anticipation of the potential supply chain disruption, on October 9, 2024, FDA used its authority to issue exemptions to the enhanced requirements. Exemption is found here. The exemptions require that the effected trading partners have at least initiated the systems and processes necessary to implement the enhanced requirements:
The exemptions apply to any product transacted by eligible trading partners who have initiated their systems and processes, as described in section 582(g)(1) of the FD&C Act, including electronic DSCSA data connections (which may include portals) with their immediate trading partners by November 27, 2024, and extend to trading partners throughout the pharmaceutical distribution supply chain who subsequently transact such product. For the purposes of these exemptions, eligible trading partners are those who have initiated their systems and processes by successfully completing data connections with their immediate trading partners and those who initiated processes including documentation of efforts to establish data connections but were not able to fully complete them with all immediate trading partners. [Exemption letter, page 2]
FDA created three separate exemptions for different Trading Partners in the supply chain. The main difference is in the duration of the exemption – the further up the supply chain, the shorter the exemption period. The exemption for manufacturers and repackagers expires on May 27, 2025; for wholesale distributors on August 27, 2025; and for dispensers on November 27, 2025. Note that small dispensers, which are those with fewer than 25 pharmacists or pharmacy technicians, are under a different exemption that was issued earlier this year and are exempt from the enhanced requirements until November 27, 2026.
To qualify for the exemptions, Trading Partners must have “initiated their systems and processes, as described in section 582(g)(1) of the FD&C Act … with their immediate trading partners by November 27, 2024” This means that it only applies to parties that have begun the process of implementing the enhanced requirements (including the electronic data interchange) and have worked with their immediate Trading Partners in that implementation before the November 27, 2024 deadline.
These exemptions provide breathing room for various supply chain Trading Partners that have begun implementing the DSCSA enhanced requirements to come into compliance, but the clock is running. These exemptions are in addition to, and do not replace the ability of companies to request their own exemptions under the Waiver, Exception and Exemption Request (WEER) process.
