Pedigree Laws and their Impact on the Animal Health Industry Annual Update

1. Pedigree Laws and their Impact on the Animal Health IndustryAnnual Update Randy Lewis MWI Veterinary Supply Co. Manager of Compliance & Regulatory Affairs

2. Background Information In 1987, The Prescription Drug Marketing Act (PDMA) was enacted. The main goals of this act were: • Ban the sale of drug samples • Ban re-importation • Require state licensing of wholesale distributors • Pedigree – This requirement was stayed until December 1, 2006.

3. FDA Counterfeit Cases Opened1997 - 2006

4. FDA & NABP Activities • February 2004 – FDA issues a report entitled “Combating Counterfeit Drugs: A Report of the Food and Drug Administration.” NABP develops the Model Rules for the Licensure of Wholesale Distributors. • March 2005 – At the request of the FDA, NABP publishes a revised version of the Model Rules for the Licensure of Wholesale Distributors. The revision addressees more stringent state licensing requirements and calls for the pedigree requirements. • May 2005 – FDA publishes the annual update on the “Combating Counterfeit Drugs: A Report of the Food and Drug Administration.” The FDA summary applauds the efforts of the NABP toward tighter control of wholesale distributor licensing. FDA keeps a “wait and see” attitude towards the federal pedigree date of 12/1/06.

5. FDA & NABP Activities • February 2005 – NABP Launches the Verified Accredited Wholesale Distributor (VAWD) program. • May 2005 – IN Governor signs licensing bill mandating VAWD. • February 2006 – NABP accredits the first 2 VAWD wholesale distributors. • June 2006 – FDA announces that the stay of the pedigree provision will be lifted December 1st 2006. Pedigree required for all non-ADR transactions. • November 2006 – FDA issues an industry compliance guide for PDMA pedigree implementation. • December 2006 – A group of secondary wholesalers are granted a temporary injunction regarding specific provisions of the pedigree requirements.

6. PDMA Pedigree Requirements §203.50 Requirements for wholesale distribution of prescription drugs: • (a) Identifying statement for sales by unauthorized distributors. Before the completion of any wholesale distribution by a wholesale distributor of a prescription drug for which the seller is not an authorized distributor of record to another wholesale distributor or retail pharmacy, the seller shall provide to the purchaser a statement identifying each prior sale, purchase, or trade of such drug. This identifying statement shall include: • (1) The proprietary and established name of the drug; • (2) Dosage; • (3) Container size; • (4) Number of containers; • (5) The drug's lot or control number(s); • (6) The business name and address of all parties to each prior transaction involving the drug, starting with the manufacturer; and • (7) The date of each previous transaction.

7. Court Injunction? What is affected by the preliminary injunction? 21 CFR § 203.50(a). The court order enjoins FDA from implementing 21 CFR § 203.50(a). 21 CFR § 203.50(a)(6), states that information regarding “each prior transaction involving the drug, starting with the manufacture” be included in the pedigree. However, while the preliminary injunction is in effect, pedigrees shall include information regarding prior transactions going back to the manufacturer or the last ADR that sold, purchased, or traded the prescription drugs. FDA encourages wholesalers to include information regarding each prior transaction going back to the manufacturer when that information is available.

8. Court Injunction?? What is not affected by the preliminary injunction? Pedigrees still must be passed by non-authorized distributors of record (non-ADR) prior to each wholesale distribution. In addition, the court does not mention other pedigree-related regulations or other agency-issued documents relating to the pedigree requirement. Accordingly, those regulations and documents are not affected by the preliminary injunction.

9. Court Injunction??? The group of wholesalers that filed the injunction against the FDA are NOT trying to have the courts dismiss pedigree entirely. All the members involved in this suit have fully functional compliant pedigree programs. The law suit is focused at how far back in the supply chain a pedigree must originate, and who must provide a pedigree. The FDA issued a compliance guide on 12/18/06 regarding the injunction. On 2/1/07, the FDA filed an appeal concerning the temporary injunction. This appeal process could take several months before any resolution may be reached.

10. Authorized Distributor of Record The PDMA requires distributors to pass a pedigree on all transactions that they are not the authorized distributor of record (ADR). ADR status is obtained by entering into a written agreement with the manufacture to distribute all or specific products. The manufacturer must maintain a list of all ADR distributors.

11. Other Legislation Pharmaceutical Market Access and Drug Safety Act of 2007 (Introduced in House) H.R.380 Title: To amend the Federal Food, Drug, and Cosmetic Act with respect to the importation of prescription drugs, and for other purposes. Sponsor: Rep Emanuel, Rahm [IL-5] (introduced 1/10/2007) Cosponsors (89) Related Bills:S.242 Latest Major Action: 2/2/2007 Referred to House subcommittee. Status: Referred to the Subcommittee on Commerce, Trade and Consumer Protection.

12. Other Legislation Tim Fagan’s Law H.R.2345 Title: To amend the Federal Food, Drug, and Cosmetic Act to increase criminal penalties for the sale or trade of prescription drugs knowingly caused to be adulterated or misbranded, to modify requirements for maintaining records of the chain-of-custody of prescription drugs, to establish recall authority regarding drugs, and for other purposes. Sponsor: Rep Israel, Steve [NY-2] (introduced 5/12/2005)       Cosponsors (14) Related Bills:H.R.1396, S.1978 Latest Major Action: 5/23/2005 Referred to House subcommittee. Status: Referred to the Subcommittee on Health.

13. What Would This Mean? • These legislative changes would strike the exemption from pedigree for manufacturers and ADR’s. • California will require electronic pedigree from manufacturer through all distributions in 2009. Other states have addressed ADR and “normal chain of distribution.”

14. VAWD Indiana requires all wholesalers licensed in their state to become VAWD certified. VAWD stands for the Verified Accredited Wholesale Distributor certification. All current license holders must attain this status by the renewal period of 9/30/07. All new license applicants must achieve VAWD status prior to issuance of a wholesaler permit by the board. The process includes among others; a $100,000 surety bond, background checks, designated representative, review of standard operating procedures (SOP’s), and a complete facility inspection. Facilities must pay an initial $5000 application fee, a $1000 annual fee, and a $5000 re-inspection every three years. As of 4/16/07, 95 facilities have successfully completed this VAWD process. Other states may require this VAWD accreditation as new legislation is enacted. CO, ID, MD, ND, OK, and OR among others have referenced VAWD in some manner in their legislation.

15. VAWD Oregon – Adopted rules 12/19/06 855-065-0006 Registration Requirements (5) Any wholesale distributor located outside the boundaries of Oregon, applying for registration or re-registration, as a Class 1 Wholesaler, after January 1, 2008 must provide evidence of one of the following: • A current license or registration as a wholesale distributor in a state that has a license or registration procedure approved by the Board that included a physical inspection within the past three years; or (b) A current accreditation by a process approved by the Board such as The National Association of Boards of Pharmacy’s Verified Accredited Wholesale Distributor (VAWD) program or other nationally recognized accreditation program or contract inspection service.

16. VAWD North Dakota – Passed Legislation. Meeting 5/17/07 to discuss draft proposed rules. 43-15.3-04. Requirements to distribute prescription drugs. 1. A person may not engage in wholesale distributions of prescription drugs without, after December 31, 2007, obtaining and maintaining accreditation or certification from the national association of boards of pharmacy's verified accredited wholesale distributor or an accreditation body approved by the board under subsection 4, obtaining and maintaining a license issued by the board, and paying any reasonable fee required by the board. 3. The board may adopt rules that permit out-of-state wholesale drug distributors to obtain a license on the basis of reciprocity if an out-of-state wholesale drug distributor possesses a valid license granted by another state and the legal standards for licensure in the other state are comparable to the standards under this chapter and the other state extends reciprocity to wholesale drug distributors licensed in this state. However, if the requirements for licensure under this chapter are more restrictive than the standards of the other state, the out-of-state wholesale drug distributor must comply with the additional requirements of this chapter to obtain a license under this chapter.

17. Pedigree Requirements by State WA ME VT MT ND MN NH OR MA NY WI ID SD RI CT MI WY PA IA NJ NE OH DC DE NV IL IN MD UT WV VA CO KS KY MO NC CA TN Pink = Passed and/or rules adopted Blue = Passed, rules pending Green = Passed Yellow = Proposed Red = None OK SC NM AR AZ AL GA MS LA TX FL AK HI

18. Other State Activities • Surety Bonds – AZ, CO, FL, IN, NV. $100,000 per facility. • Designated Representative – Pharmacy exam knowledge CA, FL. Financial background checks, fingerprints, minimum experience requirements. • Require out-of-state entities to become licensed by the state. NJ and NE previously did not require licensing of non resident wholesalers. • Nevada – Electronic monthly reporting of all pedigree transactions effective 2/15/07.

19. Summary • The PDMA pedigree is here to stay. Although the injunction was granted on certain elements, the pedigree provision is still in effect. Today, any wholesaler who is not the ADR must pass pedigree including all transactions back to the manufacturer or last ADR. • States are rapidly passing pedigree and other wholesaler legislation. States may pass laws which are more stringent than the federal PDMA. Florida and Indiana are examples of states that require additional information to be included for pedigrees in their states. • For additional information on the federal PDMA please visit the following link: http://www.fda.gov/cder/regulatory/PDMA/default.htm#relevantguidances

20. DEA UpdateFDA InspectionsState IssuesRonald W. Buzzeo, RPhChief Regulatory OfficerBuzzeoPDMADendrite Regulatory Compliance804.267-1740 x120ron.buzzeo@dendrite.com

21. The Changing LandscapeYesterday vs. Today – What is Driving Change Increased Federal Oversight • FDA • PDMA • DEA • US Attorney Increased State Oversight • Regulatory Boards • Drug Distributor Licensing • Drug Pedigree • Stricter Guidance on Wholesale Drug Distribution • Theft and Loss Reporting

22. Objectives To discuss and better understand the: • DEA Issues • PDMA Issues • State Regulations • Penalties

23. DEA Requirements

24. DEA Requirements/Regulatory Issues Registration • Signature • Type of Registration • Activities • Research, Distribution and Manufacturing Security • Access • Employee Theft • In-Transit Losses Inventories • Accuracy

25. DEA Requirements/Regulatory Issues Records • Data Elements • Name, Address, DEA Registration Number • Drug, Strength, Form, Quantity, Number of Commercial Containers • Schedule II • DEA Form 222 • Distribution/Receiving Record Reporting • Thefts and Losses • ARCOS

26. State Issues, Policy & Regulatory Requirements

27. Drug Pedigree Update • Federal Requirements • State Requirements

28. Federal – Statutory Requirements • Wholesale Distributors; guidelines for licensing • Manufacturer and Authorized Distributor of Record (ADR) • ADR – Ongoing Relationship • Statement Identifying each prior sale (currently back to last ADR) • Date of Transaction • Names and addresses of all parties to the transaction

29. Federal – Regulatory Requirements • 21 C.F.R. § 203 and 205 • FDA’s appeal filed 2/1/07 • Defines ongoing relationship • Establishes information required on pedigree (while injunction in effect) • Last ADR handling drug • Business name and address of all parties to each prior transaction starting with the manufacturer traceable back to the last ADR • Date of each previous transaction back to ADR • 69 FR 12792 – March 18, 2004 – delayed effective date. • 71 FR 34249 –June 14, 2006 – effective date Dec. 1, 2006 • RxUSA Wholesale Inc. et al vs. Department of Health and Human Services CV 06-5086 (E.D.N.Y. December 4, 2006) Order granting preliminary injunction • FDA filed Notice of Appeal on February 1, 2007

30. Wholesale Drug Distributor State Pedigree

31. States with Enacted & Proposed Legislation Relative to Drug Pedigrees • 17 states with statutes and/or regulations addressing drug pedigree or equivalents • 14 states with pending legislation on drug pedigree or equivalents

32. Drug Pedigree States with Enacted and/or Pending Laws(updated April 23, 2007) WA ME MT ND* MN VT NH OR MA NY CT WI ID* SD* RI WY MI NJ PA IA DE NE MD DC OH NV IL IN WV UT CO VA KS MO KY CA NC TN OK SC NM AR AZ Federal GA AL MS LA TX FL AK Passed Legislation or Regulation HI Pending Legislation or Regulation Passed and Pending Legislation or Regulation • - Newly passed legislation not effective until July 1, 2007

33. Changes in Passed/Enacted Pedigree Legislation Includes states with pending legislation on or before 7/1/2007. Does not include effective state rule making or enforcement activities (subject to change) Total to Date 31 61% of all States & DC have passed Pedigree Legislation

34. Who Prepares the Drug Pedigrees? • Do Samples require a Pedigree?

35. Pedigree Impact to Veterinary Wholesalers/ Distributors • Meeting federal criteria on ADR status – vendor relationship and agreements • Recordkeeping provisions • Completing manual and electronic pedigree papers specific to state requirements • Handling drop shipments and complying with state pedigree • Authentication Process – random, every transaction • Returns Processing • Credits on Returns • Potential audits – federal and state • Repackaging activities

36. Florida Pedigree Concerns – Impact to Industry and Authority Status of Florida Senate Bill 2122 Revisions • As of 4/13/07 in Agriculture Committee • Addresses industry and Department of Health concerns • Language variation on “Persons required to have Limited Prescription Drug Veterinary Wholesaler Permit” Industry Concerns • Parent company and limitation of related entity product transfers • Delay of primary application approvals • Potential denial of existing registration applications Department of Health Concerns • Potential for unregulated transfers

37. Licensing Requirements

38. State Licensing Requirements for Distributors Some states are exempting manufacturers and/or third party distributors from these rules • Extensive application and criminal background check of applicant • All senior personnel involved in the facility operations • Expense of applicant • Surety bond of not less than $100,000 • Pedigree Requirement • Pedigree Authentication – Routine and Random • Designated Representative • Authorized Distributor of Record • Shipment Examination • Routine Facility Inspections • States beginning to implement VAWD (Indiana, Oregon, North Dakota) • Licensing • In-state • Out-of-state

39. Licensing Requirements • What states requires licensing for sales reps? • What type of drugs? • What state requires the employer to provide info on the sales reps? • What type of drugs? • My distributor takes possession, do they require state licenses? • We distribute samples to veterinarians, do we require state licenses? • How many state licenses are required? • I am a virtual company yet perform no marketing or sales do I require state licenses? How many? • I am a virtual company and perform marketing and sales do I require state licenses? How many?

40. Distributor Requirements Rx and Controlled WA ME VT MT ND MN NH OR MA NY WI ID SD RI MI WY CT PA IA NJ NE OH DC DE IL IN NV MD UT WV CO VA KS KY MO NC CA TN OK SC NM AR AZ AL GA MS TX LA FL AK Registration not required HI PR Registration required

41. Industry Requirements for State Compliance Wholesale Drug Distributor Registrations • Increased requirements for fingerprinting, surety bonds, release of personal information State Pedigree Requirements • Distributing human drugs to the veterinary market • Lack of veterinary labeled products, specific to human use • Registration Verification VAWD Accreditation • Concerns on NABP meeting State issued mandates for certification • Indiana • Oregon • North Dakota

42. Penalties

43. Penalties • Failure to Make a report on a Conviction – NMT $100,000 • Provides Information – Waiver of Penalty • Conducts an Investigation – Waiver of Penalty • Person Provides Info – ½ the Criminal Fee – NMT $125,000

44. State Penalties • State Penalties for Noncompliance • Selling and/or distribution without the appropriate registration may be subject to fines, penalties, misdemeanor or felony convictions and/or seizure of product • Sales Reps may have product confiscated, fined • Company penalties range from $50-$50,000 per violation per day • Violation Examples • Failure to obtain a registration • Florida – third degree felony; imprisonment up to 5 years and a $5,000 fine • Indiana – Class D felony; 3 yrs. maximum imprisonment and $10,000 fine • North Dakota – Class C felony; imprisonment up to 5 years and $5,000 fine • Noncompliance with state requirements (i.e., recordkeeping, inventories)

45. State Penalties for Noncompliance with Pedigree Colorado • Colo. Rev. Stat. § 12-22-806 - Penalty. • (1) A person who engages in the wholesale distribution of prescription drugs in violation of this part 8 shall be subject to a penalty of up to fifty thousand dollars. • (2) A person who knowingly engages in the wholesale distribution of prescription drugs in violation of this part 8 shall be subject to a penalty of up to five hundred thousand dollars.

46. State Penalties for Noncompliance with Pedigree Florida – Offense Severity Ranking Chart Florida Statute Felony Degree Description 499.0051(1) 3rd Failure to maintain or deliver pedigree papers. 499.0051(2) 3rd Failure to authenticate pedigree papers. 499.0051(6) 2nd Sale or delivery, or possession with intent to sell, contraband legend drugs. 784.07(2)(b) 3rd Battery of law enforcement officer, firefighter, intake officer, etc. 316.193(2)(b) 3rd Felony DUI, 4th or subsequent conviction. 499.0051(3) 2nd Forgery of pedigree papers. 499.0051(4) 2nd Purchase or receipt of legend drug from unauthorized person. 499.0051(5) 2nd Sale of legend drug to unauthorized person.

47. State Penalties for Noncompliance with Pedigree Iowa • Class C Felony Idaho • Unknowing Violations. If a person unknowingly engages in the wholesale distribution of prescription drugs in violation of this act, the person may be fined not more than ten thousand dollars ($10,000). • Knowing Violations. If a person knowingly engages in wholesale distribution of prescription drugs in violation of this act, the person shall be imprisoned for any term of years, or fined not more than five hundred thousand dollars ($500,000), or both.

48. State Penalties for Noncompliance with Pedigree Wyoming • If a person unknowingly engages in the wholesale distribution of prescription drugs and acts in violation of subsection (n) of this section, the person may be assessed an administrative penalty not to exceed fifty thousand dollars ($50,000.00); • If a person knowingly engages in wholesale distribution of prescription drugs in violation of subsection (n) of this section, the person may be assessed an administrative penalty not to exceed five hundred thousand dollars ($500,000.00).

49. Questions & Answers

50. Securing the Supply Chain: Pedigree Update – Trends and The Henry Schein Experience Nancy F. Lanis, Esq. Vice President, Regulatory and Legal Affairs AVDA Annual Conference May 1, 2007