20
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UPDATE May/June 2009
T
he road to obtaining federal marketing approval/
clearance has been long—the device testing
was completed, the study data summarized, the
application submitted (along with responses to the Food and
Drug Administration’s (FDA’s) questions and requests for
additional information), and the long-awaited letter from
FDA granting clearance or approval has been received—and
now the devices are nally ready for U.S. distribution, right?
Well, maybe …
In addition to federal regulation by FDA, medical
device companies are now facing increasingly complex
and burdensome state regulatory requirements for the
distribution of their device products. Consequently, it is
vitally important for companies to consider how their ability
to launch and distribute new devices may be a ected by
the various state requirements. A well-planned distribution
strategy may mean the di erence between a smooth launch
and a huge headache. is article summarizes key aspects
of states’ regulation of the device distribution chain, and
strategic considerations for e ective distribution planning.
State Regulation:
Differences and Similarities
Device distribution in the United States presents unique
challenges. While all states have established regulatory
programs and requirements governing the drug distribution
chain, many (approximately half) of the states have no
regulatory oversight for medical device distribution. Of those
states that do regulate device distribution, the regulatory
Ms. Buenafe
is an Associate with the law fi rm of
Morgan, Lewis & Bockius, LLP,
Washington, DC.
State Regulation of Medical
Device Distribution:
Strategic Planning
Needed to Address Varying Requirements
by M. Elizabeth Bierman and Michele L. Buenafe
Ms. Bierman
is a Partner with the Law Firm of
Morgan, Lewis & Bockius, LLP,
Washington, DC.
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Update 2009, Issue 3
With Permission from FDLI, www.fdli.org
May/June 2009 UPDATE
21
FDLI
schemes used are quite varied. While
there are federal guidelines and
minimum requirements for the states’
regulation of drug distribution under
the Prescription Drug Marketing Act
(PDMA), no comparable guidelines
exist for the regulation of medical
device distribution. erefore, as
discussed below, the regulatory schemes
enacted by the various states have far
less consistency.
Regulatory Agencies
Assessing the applicable regulatory
requirements within a particular
state can be di cult, because it is
o en not immediately apparent
which state agency (if any) governs
device distribution. Most states that
have device distribution regulatory
requirements have chosen to delegate
responsibility for this program to the
same agency tasked with overseeing
drug distribution, which is usually the
state Board of Pharmacy (e.g., Arizona,
Idaho, Kansas and Maryland). However,
this approach is not universal. For
example, some states use an FDA-like
agency to oversee device distribution
(e.g., New Jersey’s Food and Drug
Safety Program). Always the regulatory
over-achiever, California has given two
agencies jurisdiction over the device
distribution chain: the Medical Device
Safety Section of the Food and Drug
Branch (for retail distribution) and
the Board of Pharmacy (for wholesale
distribution).
Types of Devices
Once the appropriate agency and
regulatory scheme have been identi ed,
the next step is to determine whether
a particular state regulates the device
product your company intends to
market. e types of devices regulated
by each state vary signi cantly. For
example, some states restrict regulation
to “durable medical equipment” or
“home medical equipment.” In states
where the regulatory scheme for device
distribution was built on the existing
framework used for drug distribution,
the requirements o en apply only to
prescription devices (a.k.a. “legend”
devices) or devices that are drug-related
(e.g., syringes or infusion pumps).
Kentucky and Arizona have taken
this concept even further by requiring
distributors to be licensed only if their
devices are labeled “Rx only,” but not
if the devices are labeled “Caution:
Federal law restricts this device to sale
by or on the order of a physician.” FDA
created confusion in Kentucky, when
it issued labeling guidance in early
2000, allowing device manufacturers
to abbreviate the required caution
statement regarding the order of a
physician to “Rx only.” Prior to issuance
of this guidance, the “Rx only” legend
was used primarily, if not only, by
drug manufacturers and distributors.
Device manufacturers have initiated
discussions with the Kentucky Board of
Pharmacy to try to correct the uneven
regulation arbitrarily created by use of
di erent words for prescription devices.
Regulated Activities
It is also important to determine what
types of distribution chain activities
each state regulates. Some states
regulate entities engaged in wholesale
distribution activities (distribution
to hospitals, clinics, retailers or other
distributors), while others regulate
only retailers and other entities that
dispense directly to patients. For
example, in states that license “durable
medical equipment” or “home medical
equipment” manufacturers-suppliers,
these requirements usually apply only
to companies that ship directly to
patients or end-users (e.g., Florida,
Illinois and Mississippi).
For those states that regulate
distribution at the wholesale level,
there is signi cant variation in what
activities are included in the de nition
of “wholesale distribution.” Some states
focus on whether an entity has physical
possession of the device products when
they are distributed into or within the
state, while others focus on whether
the entity has title to the products.
Certain states also include brokers
and other entities that arrange for the
sale of devices to be “wholesalers.” For
example, Maryland’s wholesaler license
requirements apply to all entities that
“direct or control” the distribution of
devices in Maryland (e.g., by arranging
sales or drop shipment), whether or not
such entities have physical possession
of the device products. Pennsylvania,
on the other hand, takes a completely
di erent approach by requiring a device
company to register as a distributor
only when the company employs sales
representatives in the state.
It is also important to consider what
is excluded from the de nition of
“wholesale distribution.” For example,
several states that regulate wholesale
A well-planned distribution strategy
may mean the difference between a
smooth launch and huge headache.
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www.fdli.org
UPDATE May/June 2009
distribution have exemptions for device
manufacturers that only distribute
products of their own manufacture
(e.g., California).
License/Registration
Requirements
e most consistent state requirement
for medical device distributors is the
requirement to be licensed or registered
with the state. However, the process for
obtaining such licensure/registration
varies signi cantly among the states,
making advance planning a necessity
for companies launching their rst
device product. Although some license/
registration applications are simple and
straightforward, many can be quite
lengthy, requiring the submission of
extensive background information
and a surety bond (usually around
$100,000).
For example, Maryland and
California require photographs and
ngerprints for certain employees,
which are used to perform criminal
background checks. Some states also
require an inspection before approving
an application. In Maryland, the Board
of Pharmacy requires a pre-approval
inspection for distributors, but will
only inspect in-state facilities. Out-of-
state facilities must either be accredited
under the Veri ed-Accredited
Wholesale Distributors (VAWD)
program by the National Association of
Boards of Pharmacy (NABP), or have
had an inspection by a state agency
that Maryland has determined has
an acceptable inspection program.
Because of the extensive application
packages required in some states and
the limited resources of state agencies,
the application process can take weeks
or even months. erefore, signi cant
advance planning is required to ensure
that all required licenses are obtained
before the planned product launch date.
Strategic Considerations
Given these and other state-by-state
di erences, new device manufacturers
must think strategically about
nationwide distribution of their devices.
As part of any distribution plan,
strategic issues to consider include:
whether to use a third-party distributor;
how to include prescription warnings
on device labeling; the location of
warehouse facilities; when, how, and
in what order to submit state license
applications; whether inspections are
required; and how to monitor changes
in state laws.
To signi cantly lower (and possibly
eliminate) state regulatory burdens,
one option to consider is the use
of a contract distributor or third-
party logistics provider that already
has the necessary state licenses
and registrations. If the third-party
distributor handles the physical
shipping and distribution and also takes
title to the products, the manufacturer
may not be required to obtain its own
state licenses, except in those states
where the manufacturer has warehouses
or other holding facilities.
If it is not feasible to use third parties
for all U.S. distribution activities,
manufacturers should allot su cient
time to obtain state licensure in their
pre-launch plan. Because each state
has a di erent organization and level
of available resources, the license
application processing times can vary
signi cantly, and new manufacturers and/
or device distributors need to account
for these di erences in developing their
distribution plan. Moreover, many
states require that a distributor have an
approved license in its home state before
it can apply for a license as a non-resident
distributor. us, the time required to
obtain the home-state license (or a letter
from the state authorities stating that
no license is required in that state) in
advance of submitting applications in
other states also must be considered as
part of the plan.
Although many states have regulated
device distribution for several years
or more, it is possible that the number
venturing into this area may increase
in the next few years as the states seek
other sources of revenue. States also are
extending regulation to areas beyond
distribution, such as restrictions on
device marketing and interactions
with healthcare professionals (e.g.,
Massachusetts and Nevada). As a result,
companies may need to add to their
regulatory sta to keep track of the
myriad of state requirements. Device
manufacturers and distributors not only
need to be aware of state regulatory
requirements at the time of market
launch, but also must implement a
mechanism for monitoring changes
in state laws post-market, as additional
states expand their regulatory reach to
medical devices.
Because each state has a different
organization and level of available
resources, the license application
processing times can vary signifi cantly.
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