A PublicAtion of the food
And drug lAw institute
AvAilAble Online Free tO MeM bers | www.Fdli.Org | july/August 2015
In ThIs Issue
What’s in a Name? Quantifying
the Economic Value of Label
Information
by Anthony J. Anscombe
Skinny Labeling after Hospira
v. Burwell: An End-Run around
Pharmaceutical Method
of Use Patents?
by Herman H. Yue & John D. Garretson
FDLI july-2015 Update Cover Final Design.indd 6 7/8/15 3:57 PM
Michele L. Buenafe is an associate at
Morgan, Lewis & Bockius, LLP in the FDA
practice group. Her practice focuses on
the federal and state regulatory issues
related to the manufacture, distribution,
and marketing of medical devices, digital
health technologies, pharmaceuticals,
controlled substances, human tissue
products, and combination products.
A
lthough most medical device companies focus the
bulk of their regulatory resources on compliance
with federal requirements imposed by the Food
and Drug Administration (FDA), a significant portion
of device regulation falls within the purview of state
agencies, particularly with respect to device distribution.
State regulation in this area has long been a significant
burden for companies that market and distribute devices
nationally. Currently, approximately half of the 50 states
regulate the distribution of devices, but the laws regulating
device distribution vary from state to state. These state laws
differ, for example, in the types of device products that
are subject to regulation; the activities and entities that are
subject to regulation; the requirements for licensure; and
the requirements related to facilities, processes, and quality
controls. Federal guidelines for wholesale drug distributors,
mandated by the Prescription Drug Marketing Act (PDMA),
have helped to establish a level of consistency among the
state laws and regulations governing prescription drug
distribution, but no such guidelines have been established for
medical devices.
e patchwork of state laws and regulations applicable to
device distribution has presented a tremendous challenge
for device manufacturers and distributors, particularly
given that, unlike the drug industry, most device companies
State Regulation of Medical Device
Distribution: Managing a Complex
Regulatory Scheme
By Michele L. Buenafe
July/August 2015 Update
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Medical Devices
are in the small to mid-sized range.
ese complexities become even more
dicult to manage with the increased
use of national carriers, as device
companies seek to reduce costs by
downsizing their sales force. In the
absence of federal legislation to provide
more uniformity, device companies
must continue to be mindful of
the various state requirements and
maintain systems and processes to
manage their regulatory obligations.
Managing the Challenges
Presented in Evaluating
State Regulatory
Requirements
e number of states that have laws
or regulations governing medical
device distribution—approximately
half—has remained relatively constant
over the last several years. However,
there are signicant dierences in how
each state regulates device distribution
activities. Moreover, in those states
that choose to regulate in this area,
devices are oen treated almost as
an aerthought. Very few states have
a regulatory framework designed
specically for medical devices.
Rather, working under the apparent
assumption that drugs and devices are
generally the same or “close enough,”
these states use legal and regulatory
schemes that were designed for the
pharmaceutical industry to regulate
medical devices. is, combined
with the variability among the states
in the degree of device regulation
and regulators’ understanding of the
device industry, can create signicant
challenges. Device companies,
therefore, must be prepared to manage
the inherent limitations of these state
regulatory schemes, and the dierences
among the states in the regulatory
requirements applicable to device
distribution.
ere are also signicant dierences
in how each state interprets and
enforces its laws related to device
distribution. In some states, for
example, although the state laws and
regulations allow the state regulators
to oversee device distribution
activities and to require licensure for
entities engaged in such activities,
the state regulators have chosen as
a matter of policy not to enforce
these requirements due to a lack of
resources. is has created an added
layer of confusion and complexity for
device manufacturers and wholesalers
seeking to determine their regulatory
and licensure obligations, because
these state regulators do not always
announce their enforcement policy
(e.g., in a written guidance, on the state
regulator’s website, or in any other
written regulatory document). In many
cases, device distributors only learn
about a state’s enforcement policy by
contacting the relevant state regulatory
authority directly.
us, prior to launching a device
product for the rst time, it is
important that device companies
take the time not only to evaluate the
specic state laws and regulations
applicable to device distribution,
but also to ensure they understand
how those laws and regulations are
enforced in each state. With respect to
the latter step, device companies may
have diculties in determining which
state regulatory authority to contact.
Although most states regulate device
distribution through the state Board
of Pharmacy or Board of Wholesale
Distributors, some states utilize
an FDA-like agency, while others
have multiple agencies that share
the responsibilities in this area (e.g.,
California and Pennsylvania). Device
companies, therefore, must ensure they
contact the correct regulatory agency
(or agencies) in each state when seeking
clarication on the applicability of
the state’s regulatory and licensure
requirements.
Scope of States’
Regulation for Device
Distribution
Aer determining whether a state
actively regulates and enforces device
distribution laws and regulations,
device companies must then assess
the scope of each state’s regulatory
requirements, and whether it falls
within that scope. One of the rst
questions that should be considered
is the type of devices subject to
regulation by the state. Most states that
regulate device distribution regulate
only prescription or “legend” devices,
but the states dier in how they dene
these terms. For device manufacturers
familiar with FDA regulatory
requirements, these dierences in
denitions can be perplexing. For
example, the New York Board of
Pharmacy distinguishes between
products labeled as (1) “Federal
law prohibits dispensing without a
prescription” or “Rx only,” and (2)
those labeled as “Federal law restricts
this device to sale by or on the order of
a physician.” Although FDA considers
both types of label statements to be
applicable to prescription devices,
the New York Board of Pharmacy
considers devices labeled with the
former language to be prescription
devices (subject to regulation and
licensure requirements) and the latter
to be non-prescription (not subject to
regulation or licensure requirements).
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Update July/August 2015
In addition, some states only
regulate a subset of prescription
devices that are considered “durable
medical equipment” or “home medical
equipment.” ese device categories
generally include equipment that has
been prescribed by a physician for
use in the home (e.g., hospital beds,
sleep apnea devices, infusion pumps,
walkers). us, a device company may
not be required to obtain a license in
certain states if the company’s devices
do not qualify as durable or home
medical equipment.
Device distributors also need to
assess whether the activities they
engage in within a state are subject
to regulation. Some states only
regulate entities engaged in wholesale
distribution activities (i.e., distribution
to hospitals, clinics, retailers, and
not to individual patients), while
others regulate only retailers and
other entities that dispense directly
to patients. Further, for those states
regulating wholesale distributors,
some regulate only the entity that
holds title to the devices when they are
distributed into the state. Other states,
such as California, regulate not only
device distributors, but also third-party
logistics providers that provide only
warehousing and logistics services,
and do not take title to the devices
that they handle. And at least one
state (Pennsylvania) requires a device
distributor to register with the state
only if it employs sales representatives
in the state.
Device companies also must
consider whether any regulatory
exemptions may apply. For example,
many states exempt FDA-registered
device manufacturers from oversight,
provided that the manufacturers
only distribute devices of their own
manufacture.
State Licensure
Requirements
One of the most important
considerations for device distributors
in assessing their state regulatory
obligations is the state licensure or
registration requirements. Advance
planning is critical for companies
launching their rst device product,
due to the lead time needed in some
states to provide all the supporting
documentation and information
required for the license application. For
example, some states (e.g., California
and Maryland) require ngerprints
and background checks for certain
employees, and a few states require a
$100,000 surety bond (e.g., Arizona).
Several states require an inspection
or a recent inspection report before
approving a license/registration
application. Maryland requires out-of-
state facilities to either be accredited
under the Veried-Accredited
Wholesale Distributors (VAWD)
program by the National Association
of Boards of Pharmacy (NABP), or
to have had an inspection by a state
agency that Maryland has determined
has an acceptable inspection program.
For distributors seeking to distribute
devices in all 50 states plus the District
of Columbia, the order in which
license applications are submitted
can be important. For example, when
obtaining nonresident licenses to
ship into other states, most states
require that a distributor rst obtain a
license in its home state before it can
apply for the nonresident license. If
a distributor’s home state is one that
has a long processing period, this can
signicantly lengthen the timeline for
a market launch. Additionally, some
states (e.g., Georgia) require applicants
to provide verication of every state in
which the distributor is licensed. us,
it may be easier to obtain licensure in
these states earlier in the process, when
the distributor has only a few state
licenses.
Facility and Related
Requirements
Beyond licensure, device distributors
also will need to understand and
manage the various state requirements
related to facility controls, quality
controls, personnel, security, record-
keeping, and supplier/customer
diligence (i.e., conrmation that
suppliers and customers are
appropriately licensed to sell or
purchase medical devices). ese
requirements also vary from state to
state, with some states imposing more
detailed and onerous obligations, and
others having more general and exible
requirements.
Device companies engaged
in distribution must dra and
implement appropriate procedures
and processes to ensure compliance
with these state requirements prior
to beginning any device distribution
activities (e.g., for quality control,
environmental monitoring, rst-in-
rst-out requirements, monitoring of
expiration dates, complaint handling,
returned products, and recordkeeping).
is is particularly important if the
distribution facility is located in a state
that requires an inspection prior to
licensure. Additionally, distributors
must ensure their distribution
warehouses are of adequate size and
construction, have a separate area
for quarantined products, and have
appropriate security controls. Some
Medical Devices
July/August 2015 Update
23
FDLI
Medical Devices
states (e.g., Arizona and Montana)
require distributors to submit a
oor plan of the facility with their
license application to demonstrate
that the applicant meets the state’s
requirements related to facility and
security controls. Distributors also
must evaluate whether there are
specic state requirements relevant
to personnel, such as requiring that
personnel handling prescription
devices have adequate training,
technical qualications, education, and
experience. Certain states also require
a designated representative or other
licensed person at each facility (e.g.,
Maryland and Utah).
Potential Federal
Legislation
One issue that many device
distributors have been following closely
is the potential for federal legislation
in this area. In particular, distributors
have been keeping an eye on legislation
draed by the House Energy and
Commerce Committee, referred to
as the “21st Century Cures Act.” An
earlier dra of this proposed legislation
included a section entitled the “Device
Distribution Licensing Act of 2015,”
which was proposed and supported by
a coalition of device distributors. e
most recent version of the 21st Century
Cures Act did not include these
provisions.
If enacted, the proposed Device
Distribution Licensing Act would
signicantly impact the state license
requirements for prescription device
manufacturers, distributors, and third-
party logistics providers, as it would
create a closed distribution chain for
prescription medical devices, modeled
aer the one created for prescription
drug distribution under the Drug
Quality and Security Act of 2013. It
would impose licensure and other
requirements for prescription device
manufacturers, wholesale distributors,
third-party logistics providers and
dispensers, and also would require
FDA to issue regulations dening
standards for licensing wholesale
distributors and third-party logistics
providers that handle prescription
medical devices.
Conclusion
Compliance with state device
distribution laws and regulations
remains a challenge for companies
distributing prescription devices
to all 50 states. To manage these
requirements, advance planning is
key, and must include developing
a good understanding of the state
requirements applicable to your
devices. While federal legislation, such
as the Device Distribution Licensing
Act, still could be revived and oer
some level of uniformity for device
distributors in the future, it does not
appear that such relief will be available
soon.
FDLI
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Update July/August 2015
