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U.S. Department of Health and Human Services


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Counterfeit Drug Task Report February 2004 Update - REGULATORY INITIATIVES AND STATE MODEL RULES

All levels of government, in addition to the private sector, should take responsibility for ensuring the safety and security of the U.S. drug distribution system. Each level has a role in deterring and preventing the introduction of counterfeit drugs into the nation's drug supply chain. To complement and build on the technology measures described above, regulatory and legislative steps at all levels of government may be necessary. At the Federal level, FDA is taking steps to meet the objectives of the Prescription Drug Marketing Act (PDMA), which is intended to address vulnerabilities in the U.S. drug distribution system. At the State level, it would be beneficial for states to strengthen their provisions governing wholesale distribution, as described below in the revised Model Rules for Licensure of Wholesale Distributors. And, FDA plans to pursue increased criminal penalties for counterfeiting in the United States Sentencing Commissions sentencing guidelines.


  1. What FDA sought comment on:
    What are the most effective ways to achieve the goals of PDMA and, given recent or impending advances in technology discuss the feasibility of using an electronic pedigree in lieu of a paper pedigree? 
  2. What the Comments Said:
    Many of the comments that discussed PDMA acknowledged the limitations and concerns of full implementation of PDMA. However, many comments also supported the use of paper pedigrees for their deterrent value and as a means to verify prior sales through due diligence. A risk-based approach to implementing PDMA, which focuses on those drugs that are at high risk of being counterfeited, was suggested, as well as maintaining a full pedigree that documents all sales and transactions back to the manufacturer for drugs and high risk. One comment suggested an interim solution of "one forward, one back" pedigree for high-risk drugs. However, a number of the comments noted the high cost and incomplete protection provided by such paper requirements, especially as a general interim measure; by the time these costly requirements were phased in, they could be replaced by a more modern system. A majority of the comments supported the eventual use of an electronic pedigree for all drug products in the supply chain and indicated that an electronic pedigree should be considered as a modern solution to fulfilling and exceeding the PDMA goals, and urged FDA to take steps to help achieve a reliable pedigree solution as quickly as possible. As noted above, FDA believes that substantial progress toward a more cost-effective solution than incomplete and costly paper pedigrees is possible within the next several years. A detailed discussion of the comments is in Appendix B. 
  3. Discussion:
    FDA has worked closely with affected parties to identify and resolve concerns related to the implementation of the pedigree requirements of the PDMA. Through the various public comment opportunities over the years, the agency has heard mixed reviews about the value, utility, and difficulty of implementing a paper pedigree that identifies each prior sale, purchase, or trade of such drug. The comments received in response to questions raised in the Interim Report confirm that these concerns continue.

    FDA is encouraged by the enthusiasm and interest that stakeholders in the U.S. drug supply chain have expressed toward the adoption of sophisticated track and trace technologies that are more reliable than paper pedigrees. As discussed above, there appears to be movement by industry toward implementation of electronic track and trace capability in 2007. When this is in place, RFID should be able to function as a de facto electronic pedigree that follows the product from the place of manufacturer through the U.S. drug supply chain to the final dispenser. If developed properly, this electronic pedigree could be used to meet the statutory requirement in 21 U.S.C. § 353(e)(1)(A) to provide a pedigree under certain circumstances.

    In the interim, until the electronic pedigree is in widespread use, voluntary adoption of multi-layer strategies and measures discussed in this report would reduce the likelihood that counterfeit drugs will be introduced into the U.S. drug distribution system. These measures, combined with RFID technology, can help provide effective long-term protections that will minimize the number of counterfeit drug products in the U.S. distribution system.

    As discussed in a notice published in the Federal Register in conjunction with the publication of this report, FDA plans to continue to stay the of implementation of 21 CFR §§ 203.3(u) and 203.50. However, the agency intends to continue to reassess the stay of implementation on an annual basis. The agency will monitor closely whether progress toward the implementation of electronic pedigrees continues at the rapid pace evident in this task force analysis. Our plan to reassess the stay annually is part of the agency's strong commitment to see that effective product tracing is implemented as quickly as possible. The agency also encourages wholesalers to provide pedigree information that documents the prior history of a drug product, particularly for drugs most likely to be counterfeited, even when the passing of such a pedigree is not required by the Act. The suggestion from the comments that there be a one-forward, one-back pedigree for high-risk drugs in the interim, until an electronic pedigree is uniformly adopted, may have merit. However, FDA believes that Congress would have to amend section 503(e) of the Act if such a system is to become a requirement. 
  4. FDA Conclusion:
  5. Adoption of electronic track and trace technology would help stakeholders meet and surpass the goals of PDMA. Therefore, FDA intends to focus its efforts on facilitating industry adoption of this technology within the next few years.

    To allow stakeholders to continue to move toward the goal of an electronic pedigree, FDA intends to delay the effective date of 21 CFR §§ 203.3(u) (definition of ADR criterion) and 203.50 (specific requirements regarding pedigree) until December 2006; By December 2006, FDA intends to determine whether to further stay the regulations or take other appropriate regulatory action.


  1. What FDA sought comment on:
    • How should the NABP Model Rules for Licensure of Wholesale Distributors (Model Rules) be updated?
    • Whether FDA regulations at 21 CFR Part 205, should be updated, as appropriate, to make it consistent with updates to the NABP Model Rules?
  2. What the Comments Said: The comments overwhelmingly supported strengthening state requirements governing the licensure and oversight of wholesale distributors. Many comments cited the systemic weaknesses in the oversight of the wholesale drug industry and that existing inspection and due diligence processes are often insufficient to detect criminal activity. Some comments noted the positive steps already taken by some states, such as Florida, toward more effective regulation of wholesale distributors. For example, Florida has implemented more stringent requirements for licensure, stronger penalties, and due diligence requirements. Most comments stated that the full adoption of revised NABP model rules would improve security nationwide, and that stricter uniform standards were desirable across all 50 states so as not to create 50 different sets of criteria and rules for licensing. FDA was encouraged to revisit the current minimum standards requirements described in 21 CFR Part 205 to assess whether a 'federal floor' for states would enhance or diminish state efforts to meet the NABP recommendations. A detailed discussion of the comments is in Appendix B.
  3. Discussion:
    FDA is pleased to recognize the recent efforts by NABP in revising the Model Rules. The revised Model Rules significantly strengthen the requirements for licensure, as well as put in place or fortify requirements that will ensure and protect the integrity of drug products as they travel through the U.S. drug supply chain from the manufacturer to the consumer.

    NABP sought comment from FDA, as well as interested stakeholders, in developing the revised Model Rules. The comments that FDA received as part of the anti-counterfeiting initiative have been discussed with NABP.

    The revision of the Model Rules sought to enhance the protections included in the original version of the Model Rules and close existing gaps.
    The table below contains highlights of the revised Model Rules:

    Revisions to Model Rules for Conterfeit Drugs Task Report February 2004

    NABP is taking steps to facilitate implementation of the revised Model Rules, including: 1) publishing a list of susceptible products and calling for a coalition of national organizations to develop a process to maintain and update the list; 2) serving as bondholder for wholesalers in order to consolidate the need to hold a bond in all states where a wholesaler may do business; and 3) establishing a clearinghouse that will list wholesalers who receive accreditation by NABP and who have passed an inspection by their newly created inspection service, which NABP will conduct in partnership with the states. FDA supports NABP's efforts to facilitate adoption and implementation of the enhanced Model Rules.

    Counterfeiting is a problem that is not isolated to one state. If a state strengthens its licensing requirements while a bordering state does not, the counterfeiters and illegitimate wholesalers will likely move into the bordering state. Widespread state adoption, implementation, and enforcement of the Model Rules would help combat counterfeiting.
  4. FDA Conclusion:

Because States have an important role in regulating drug distributors, adopting and enforcing stronger state anti-counterfeiting requirements would help in our collective effort to detect and deter counterfeiting.

FDA strongly supports the efforts taken by NABP to enhance the Model Rules and other actions taken to facilitate implementation; FDA supports all efforts by the States to adopt these Model Rules. Adoption of the model rules by all States would have a significant impact on protecting the nation's drug supply by ensuring that all persons and entities involved in wholesale distribution of drug products meet stringent licensing criteria and maintained high ethical and business standards; FDA encourages these state actions and the agency intends to explore whether and to what extent to revise the current minimum standards for state licensing of wholesale prescription drug distributors in 21 CFR Part 205.


  1. What FDA sought comment on:
    Discuss the advantages and disadvantages of increased penalties for counterfeiting drugs
  2. What the Comments Said:
    There was overwhelming support and unanimous agreement that higher penalties for counterfeiting are needed. 
  3. Discussion:
    FDA agrees with comments suggesting that higher penalties deter drug counterfeiters. Current sentencing guidelines for counterfeit drug distribution are not commensurate with the public health threat posed by this criminal activity and strengthening the guidelines should help deter such conduct in the first instance. Despite the significant threat to public health posed by counterfeit drug products, current law provides penalties far below the level of some purely economic crimes. For example, counterfeiting a prescription drug label (bearing a registered trademark) is punishable by up to ten years in prison, while counterfeiting the drug itself is punishable by a maximum of only three years in prison. Therefore, FDA plans to continue to pursue its request that the United States Sentencing Commission consider amending the sentencing guidelines to substantially increase criminal penalties for manufacturing and distributing counterfeit drug products and to specifically provide for enhanced penalties based on the level of risk to the public health involved in the offense.
  4. FDA Conclusion: 
FDA intends to pursue its request that the United States Sentencing Commission consider amending the sentencing guidelines to increase substantially criminal penalties for manufacturing and distributing counterfeit drugs and to provide specifically for enhanced penalties based on the level of risk to the public health involved in the offense.