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113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     113-93
======================================================================
 
              SAFEGUARDING AMERICA'S PHARMACEUTICALS ACT 

                                OF 2013

                                _______
                                

  June 3, 2013.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Upton, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 1919]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 1919) to amend the Federal Food, Drug, and 
Cosmetic Act with respect to the pharmaceutical distribution 
supply chain, and for other purposes, having considered the 
same, report favorably thereon with an amendment and recommend 
that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................    24
Background and Need for Legislation..............................    24
Hearings.........................................................    26
Committee Consideration..........................................    26
Committee Votes..................................................    26
Committee Oversight Findings.....................................    29
Statement of General Performance Goals and Objectives............    29
New Budget Authority, Entitlement Authority, and Tax Expenditures    29
Earmarks, Limited Tax Benefits, and Limited Tariff Benefits......    29
Committee Cost Estimate..........................................    29
Congressional Budget Office Estimate.............................    29
Federal Mandates Statement.......................................    34
Duplication of Federal Programs..................................    34
Disclosure of Directed Rule Makings..............................    34
Advisory Committee Statement.....................................    34
Applicability to Legislative Branch..............................    34
Section-by-Section Analysis of the Legislation...................    35
Changes in Existing Law Made by the Bill, as Reported............    36
Minority, Additional or Dissenting Views.........................    67

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  (a) Short Title.--This Act may be cited as the ``Safeguarding 
America's Pharmaceuticals Act of 2013''.
  (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title.
Sec. 2. Pharmaceutical distribution supply chain.
Sec. 3. Enhanced drug distribution security.
Sec. 4. National standards for wholesale distributors.
Sec. 5. National licensure standards for third-party logistics 
providers.
Sec. 6. Penalties.
Sec. 7. Uniform national policy.
Sec. 8 Electronic labeling.

SEC. 2. PHARMACEUTICAL DISTRIBUTION SUPPLY CHAIN.

  Chapter V of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 351 
et seq.) is amended by adding at the end the following:

        ``Subchapter H--Pharmaceutical Distribution Supply Chain

``SEC. 581. DEFINITIONS.

  ``In this subchapter:
          ``(1) Authorized.--The term `authorized' means--
                  ``(A) in the case of a manufacturer or repackager, 
                having a valid registration in accordance with section 
                510; and
                  ``(B) in the case of a wholesale distributor, third-
                party logistics provider, or dispenser, licensed (as 
                defined in this section).
          ``(2) Dispenser.--The term `dispenser'--
                  ``(A) subject to subparagraph (C), means a retail 
                pharmacy, hospital pharmacy, a group of chain 
                pharmacies under common ownership and control, or any 
                other person authorized by law to dispense or 
                administer prescription drugs, to the extent such 
                pharmacy, group, or person does not act as a wholesale 
                distributor;
                  ``(B) includes warehouses and distribution centers 
                under common ownership or control of entities described 
                in subparagraph (A) that are members of an affiliated 
                group pursuant to section 1504(a) of the Internal 
                Revenue Code of 1986, to the extent such warehouses and 
                distribution centers do not act as a wholesale 
                distributor; and
                  ``(C) does not include a person who only dispenses 
                prescription drug product to be used in animals in 
                accordance with section 512(a)(5).
          ``(3) Disposition.--The term `disposition', with respect to a 
        prescription drug product within the possession and control of 
        an entity--
                  ``(A) means the removal of such prescription drug 
                product, or taking measures to prevent the introduction 
                of such prescription drug product, from the 
                pharmaceutical distribution supply chain; and
                  ``(B) may include disposal, return of the 
                prescription drug product for disposal, or other 
                appropriate handling and other actions such as 
                retaining a sample of the prescription drug product for 
                additional physical examination or laboratory analysis 
                by a manufacturer or regulatory or law enforcement 
                agency.
          ``(4) Distribute or distribution.--The terms `distribute' and 
        `distribution' mean the sale, purchase, trade, delivery, 
        handling, or storage of a prescription drug product.
          ``(5) Illegitimate prescription drug product.--The term 
        `illegitimate prescription drug product' means a prescription 
        drug product which a manufacturer has confirmed--
                  ``(A) is counterfeit, diverted, or stolen;
                  ``(B) is intentionally adulterated such that the 
                prescription drug product would result in serious 
                adverse health consequences or death to humans; or
                  ``(C) is otherwise unfit for distribution such that 
                the prescription drug product is reasonably likely to 
                cause serious adverse human health consequences or 
                death.
          ``(6) Licensed.--The term `licensed' means--
                  ``(A) in the case of a wholesale distributor, having 
                a valid license to make wholesale distributions 
                consistent with the standards under section 583;
                  ``(B) in the case of a third-party logistics 
                provider, having a valid license to engage in the 
                activities of a third-party logistics provider in 
                accordance with section 584; and
                  ``(C) in the case of a dispenser, having a valid 
                license to dispense prescription drugs under State law.
          ``(7) Manufacturer.--The term `manufacturer' means, with 
        respect to a prescription drug product--
                  ``(A) a person that holds an application approved 
                under section 505 or a license issued under section 351 
                of the Public Health Service Act for such prescription 
                drug product, or if such prescription drug product is 
                not the subject of an approved application or license, 
                the person who manufactured the prescription drug 
                product;
                  ``(B) a co-licensed partner of the person described 
                in subparagraph (A) that obtains the prescription drug 
                product directly from the person described in such 
                subparagraph; or
                  ``(C) a person that--
                          ``(i) is a member of an affiliated group (as 
                        defined in section 1504(a) of the Internal 
                        Revenue Code of 1986) to which a person 
                        described in subparagraph (A) or (B) is also a 
                        member; and
                          ``(ii) receives the prescription drug product 
                        directly from a person described in 
                        subparagraph (A) or (B).
          ``(8) Package.--
                  ``(A) In general.--The term `package' means the 
                smallest individual saleable unit of prescription drug 
                product for distribution in interstate commerce by a 
                manufacturer or repackager that is intended by the 
                manufacturer for ultimate sale to the dispenser of such 
                prescription drug product.
                  ``(B) Individual saleable unit.--The term `individual 
                saleable unit' means the smallest container of 
                prescription drug product introduced into interstate 
                commerce by the manufacturer or repackager that is 
                intended by the manufacturer for individual sale to a 
                dispenser.
          ``(9) Prescription drug.--The term `prescription drug' means 
        a drug for human use subject to section 503(b)(1).
          ``(10) Prescription drug product.--The term `prescription 
        drug product' means a prescription drug in a finished dosage 
        form for administration to a patient without substantial 
        further manufacturing (such as capsules, tablets, and 
        lyophilized prescription drug products before reconstitution).
          ``(11) Prescription drug product identifier.--The term 
        `prescription drug product identifier' means a standardized 
        graphic that--
                  ``(A) includes the standardized numerical identifier, 
                lot number, and expiration date of a prescription drug 
                product; and
                  ``(B) is in both human-readable form and on a 
                machine-readable data carrier that conforms to the 
                standards developed by a widely recognized 
                international standards development organization.
          ``(12) Quarantine.--The term `quarantine' means to store or 
        identify a product, for the purpose of preventing distribution 
        or transfer of the product, in a physically separate area 
        clearly identified for such use, or through use of other 
        procedures such as automated designation.
          ``(13) Repackager.--The term `repackager' means a person who 
        owns or operates an establishment that repacks and relabels a 
        prescription drug product or package for further sale or 
        distribution.
          ``(14) Return.--The term `return' means providing 
        prescription drug product to the authorized trading partner or 
        trading partners from which such prescription drug product was 
        purchased or received, or to a returns processor for handling 
        of such prescription drug product.
          ``(15) Returns processor.--The terms `returns processor' mean 
        a person who owns or operates an establishment that provides 
        for the disposition of or otherwise processes saleable and 
        nonsaleable prescription drug product received from an 
        authorized trading partner such that the prescription drug 
        product may be processed for credit to the purchaser, 
        manufacturer, seller, or disposed of for no further 
        distribution.
          ``(16) Specific patient need.--The term `specific patient 
        need'--
                  ``(A) means with respect to the transfer of a 
                prescription drug product from one pharmacy to another, 
                to fill a prescription for an identified patient; and
                  ``(B) does not include the transfer of a prescription 
                drug product from one pharmacy to another for the 
                purpose of increasing or replenishing stock in 
                anticipation of a potential need.
          ``(17) Standardized numerical identifier.--The term 
        `standardized numerical identifier' means a set of numbers or 
        characters that--
                  ``(A) is used to uniquely identify each package or 
                homogenous case of the prescription drug product; and
                  ``(B) is composed of the National Drug Code that 
                corresponds to the specific prescription drug product 
                (including the particular package configuration) 
                combined with a unique alphanumeric serial number of up 
                to 20 characters.
          ``(18) Suspect prescription drug product.--The term `suspect 
        prescription drug product' means a prescription drug product 
        for which there is reason to believe that such prescription 
        drug product--
                  ``(A) is potentially counterfeit, diverted, or 
                stolen;
                  ``(B) is potentially intentionally adulterated such 
                that the prescription drug product would result in 
                serious adverse health consequences or death to humans; 
                or
                  ``(C) appears otherwise unfit for distribution such 
                that the prescription drug product would result in 
                serious adverse health consequences or death to humans.
          ``(19) Third-party logistics provider.--The term `third-party 
        logistics provider' means an entity that provides or 
        coordinates warehousing, distribution, or other logistics 
        services of a prescription drug product in interstate commerce 
        on behalf of a manufacturer, wholesale distributor, or 
        dispenser of a prescription drug product, but does not take 
        ownership of the prescription drug product, nor have 
        responsibility to direct the sale or disposition of, the 
        prescription drug product.
          ``(20) Trading partner.--The term `trading partner' means--
                  ``(A) a manufacturer, repackager, wholesale 
                distributor, or dispenser from whom a manufacturer, 
                repackager, wholesale distributor, or dispenser accepts 
                ownership of a prescription drug product or to whom a 
                manufacturer, repackager, wholesale distributor, or 
                dispenser transfers ownership of a prescription drug 
                product; or
                  ``(B) a third-party logistics provider from whom a 
                manufacturer, repackager, wholesale distributor, or 
                dispenser accepts possession of a prescription drug 
                product or to whom a manufacturer, repackager, 
                wholesale distributor, or dispenser transfers 
                possession of a prescription drug product.
          ``(21) Transaction.--
                  ``(A) In general.--The term `transaction' means the 
                transfer in interstate commerce of prescription drug 
                product between persons in which a change of ownership 
                occurs.
                  ``(B) Exemptions.--The term `transaction' does not 
                include--
                          ``(i) intracompany distribution of any 
                        prescription drug product, including between 
                        members of an affiliated group (as defined in 
                        section 1504(a) of the Internal Revenue Code of 
                        1986);
                          ``(ii) the distribution of a prescription 
                        drug product among hospitals or other health 
                        care entities that are under common control;
                          ``(iii) the distribution of a prescription 
                        drug product for emergency medical reasons 
                        including a public health emergency declaration 
                        pursuant to section 319 of the Public Health 
                        Service Act, except that a drug shortage not 
                        caused by a public health emergency shall not 
                        constitute an emergency medical reason;
                          ``(iv) the dispensing of a prescription drug 
                        product pursuant to a valid prescription 
                        executed in accordance with section 503(b)(1);
                          ``(v) the distribution of prescription drug 
                        product samples by a manufacturer or a licensed 
                        wholesale distributor in accordance with 
                        section 503(d);
                          ``(vi) the distribution of blood or blood 
                        components intended for transfusion;
                          ``(vii) the distribution of minimal 
                        quantities of prescription drug product by a 
                        licensed retail pharmacy to a licensed 
                        practitioner for office use;
                          ``(viii) the distribution of a prescription 
                        drug product by a charitable organization to a 
                        nonprofit affiliate of the organization to the 
                        extent otherwise permitted by law;
                          ``(ix) the distribution of a prescription 
                        drug product pursuant to the sale or merger of 
                        a pharmacy or pharmacies or a wholesale 
                        distributor or wholesale distributors, except 
                        that any records required to be maintained for 
                        the prescription drug product shall be 
                        transferred to the new owner of the pharmacy or 
                        pharmacies or wholesale distributor or 
                        wholesale distributors;
                          ``(x) the dispensing of a prescription drug 
                        product approved under section 512(b);
                          ``(xi) the transfer of prescription drug 
                        products to or from any facility that is 
                        licensed by the Nuclear Regulatory Commission 
                        or by a State pursuant to an agreement with 
                        such Commission under section 274 of the Atomic 
                        Energy Act of 1954 (42 U.S.C. 2021);
                          ``(xii) the distribution of a combination 
                        product that consists of--
                                  ``(I) a product comprised of two or 
                                more components that are each a drug, 
                                biological product, or device and that 
                                are physically, chemically, or 
                                otherwise combined or mixed and 
                                produced as a single entity;
                                  ``(II) two or more separate products 
                                packaged together in a single package 
                                or as a unit and comprised of a drug 
                                and device or a device and biological 
                                product; or
                                  ``(III) two or more finished devices 
                                plus one or more drug or biological 
                                products which are packaged together in 
                                a medical convenience kit described in 
                                clause (xiv);
                          ``(xiii) the distribution of a medical 
                        convenience kit which is a collection of 
                        finished products (consisting of devices or 
                        drugs) assembled in kit form strictly for the 
                        convenience of the purchaser or user if--
                                  ``(I) the medical convenience kit is 
                                assembled in an establishment that is 
                                registered with the Food and Drug 
                                Administration as a medical device 
                                manufacturer;
                                  ``(II) the person who manufacturers 
                                the medical convenience kit purchased 
                                the prescription drug product directly 
                                from the manufacturer or from a 
                                wholesale distributor that purchased 
                                the prescription drug product directly 
                                from the manufacturer;
                                  ``(III) the person who manufacturers 
                                the medical convenience kit does not 
                                alter the primary container or label of 
                                the prescription drug product as 
                                purchased from the manufacturer or 
                                wholesale distributor;
                                  ``(IV) the medical convenience kit 
                                does not contain a controlled substance 
                                (as defined in section 102 of the 
                                Controlled Substances Act); and
                                  ``(V) the prescription drug products 
                                contained in the medical convenience 
                                kit are--
                                          ``(aa) intravenous solutions 
                                        intended for the replenishment 
                                        of fluids and electrolytes;
                                          ``(bb) drugs intended to 
                                        maintain the equilibrium of 
                                        water and minerals in the body;
                                          ``(cc) drugs intended for 
                                        irrigation or reconstitution;
                                          ``(dd) anesthetics;
                                          ``(ee) anticoagulants;
                                          ``(ff) vasopressors; or
                                          ``(gg) sympathicomimetics;
                          ``(xiv) the distribution of an intravenous 
                        prescription drug product that, by its 
                        formulation, is intended for the replenishment 
                        of fluids and electrolytes (such as sodium, 
                        chloride, and potassium) or calories (such as 
                        dextrose and amino acids);
                          ``(xv) the distribution of an intravenous 
                        prescription drug product used to maintain the 
                        equilibrium of water and minerals in the body, 
                        such as dialysis solutions;
                          ``(xvi) the distribution of a prescription 
                        drug product that is intended for irrigation or 
                        reconstitution, or sterile water, whether 
                        intended for such purposes or for injection;
                          ``(xvii) the distribution of compressed 
                        medical gas; or
                          ``(xviii)(I) the distribution of a product by 
                        a dispenser, or a wholesale distributor acting 
                        at the direction of the dispenser, to a 
                        repackager registered under section 510 for the 
                        purpose of repackaging the drug for use by that 
                        dispenser or another health care entity that is 
                        under the dispenser's ownership or control, so 
                        long as the dispenser retains ownership of the 
                        prescription drug product; and
                          ``(II) the saleable or nonsaleable return by 
                        such repackager of such prescription drug 
                        product.
                  ``(C) Compressed medical gas.--For purposes of 
                subparagraph (B)(xviii), the term `compressed medical 
                gas' means any substance in its gaseous or cryogenic 
                liquid form that meets medical purity standards and has 
                application in a medical or homecare environment, 
                including oxygen and nitrous oxide.
          ``(22) Transaction history.--The term `transaction history' 
        means a statement that--
                  ``(A) includes the transaction information for each 
                transaction conducted with respect to a prescription 
                drug product beginning with the manufacturer or initial 
                purchase distributor for each prior transaction going 
                back to the manufacturer of the prescription drug 
                product or to the initial purchase distributor; and
                  ``(B) is in paper or electronic form.
          ``(23) Transaction information.--The term `transaction 
        information' means--
                  ``(A) the proprietary or established name or names of 
                the prescription drug product;
                  ``(B) the strength and dosage form of the 
                prescription drug product;
                  ``(C) the National Drug Code number of the 
                prescription drug product;
                  ``(D) the container size;
                  ``(E) the number of containers;
                  ``(F) the lot number of the prescription drug 
                product;
                  ``(G) the date of the transaction;
                  ``(H) the business name and address of the person 
                from whom ownership is being transferred; and
                  ``(I) the business name and address of the person to 
                whom ownership is being transferred.
          ``(24) Transaction statement.--The `transaction statement' is 
        a statement, which states that the manufacturer, repackager, 
        wholesale distributor, third-party logistics provider, or 
        dispenser transferring ownership in a transaction--
                  ``(A) is authorized;
                  ``(B) received transaction information and a 
                transaction statement as required under section 582 
                from the prior owner of the prescription drug product;
                  ``(C) did not knowingly and intentionally ship an 
                illegitimate prescription drug product;
                  ``(D) did not knowingly and intentionally provide 
                false transaction information; and
                  ``(E) did not knowingly and intentionally alter the 
                transaction history.
          ``(25) Verification and verify.--The terms `verification' and 
        `verify'--
                  ``(A) mean determining whether the prescription drug 
                product identifier affixed to, or imprinted upon, a 
                package or homogeneous case of the prescription drug 
                product corresponds to the standardized numerical 
                identifier or lot number, and expiration date assigned 
                to the prescription drug product by the manufacturer or 
                the repackager, as applicable; and
                  ``(B) include making the determination under 
                subparagraph (A) using human-readable or machine-
                readable methods.
          ``(26) Wholesale distributor.--The term `wholesale 
        distributor'--
                  ``(A) means a person engaged in wholesale 
                distribution (as defined in section 583); and
                  ``(B) excludes--
                          ``(i) a manufacturer, a co-licensed partner 
                        of a manufacturer, or a third-party logistics 
                        provider, or a dispenser who does not engage in 
                        such wholesale distribution;
                          ``(ii) a repackager engaged in such wholesale 
                        distribution; or
                          ``(iii) the distribution of prescription drug 
                        product or an offer to distribute prescription 
                        drug product by an authorized repackager that 
                        has taken ownership or possession of the 
                        prescription drug product and repacked the 
                        prescription drug product in accordance with 
                        the requirements of section 582(e).

``SEC. 582. REQUIREMENTS.

  ``(a) In General.--
          ``(1) Compliance required.--An entity that is a manufacturer, 
        repackager, wholesale distributor, third-party logistics 
        provider, or dispenser shall comply with the requirements of 
        this section. If an entity meets the definition of more than 
        one of the entities referred to in the preceding sentence, such 
        entity shall comply with all applicable requirements of this 
        section, but shall not be required to comply with duplicative 
        requirements.
          ``(2) Standards.--The Secretary shall, in consultation with 
        other appropriate Federal officials, manufacturers, 
        repackagers, wholesale distributors, third-party logistics 
        providers, and dispensers, establish, by regulation, standards 
        for the exchange of transaction information for purposes of 
        complying with this section. The standards established under 
        this paragraph shall be in accordance with a form developed by 
        a widely recognized international standards development 
        organization. In establishing such standards, the Secretary 
        shall consider the feasibility of establishing standardized 
        documentation to be used by all members of the pharmaceutical 
        distribution supply chain to convey the transaction history and 
        transaction statement to the subsequent owner of a prescription 
        drug product. The Secretary shall publish such standards not 
        later than 180 days after the date of the enactment of the 
        Safeguarding America's Pharmaceuticals Act of 2013.
          ``(3) Waivers, exceptions, and exemptions.--Not later than 
        one year after the date of the enactment of the Safeguarding 
        America's Pharmaceuticals Act of 2013, the Secretary shall 
        promulgate a regulation to--
                  ``(A) establish a process by which the Secretary may 
                grant, at the request of an authorized manufacturer, 
                repackager, wholesale distributor, or dispenser, a 
                waiver from any of the requirements of this section--
                          ``(i) if the Secretary determines that such 
                        requirements would result in an undue economic 
                        hardship; or
                          ``(ii) for emergency medical reasons, 
                        including a public health emergency declaration 
                        pursuant to section 319 of the Public Health 
                        Service Act;
                  ``(B) establish a process, with respect to the 
                prescription drug product identifier requirement under 
                paragraph (2) of subsections (b), (c), (d), and (e) 
                through which--
                          ``(i) a manufacturer or repackager may 
                        request a waiver with respect to prescription 
                        drug products that are packaged in a container 
                        too small or otherwise unable to accommodate a 
                        label with sufficient space to bear the 
                        information required for compliance with such 
                        requirement; and
                          ``(ii) the Secretary determines whether to 
                        waive such requirement; and
                  ``(C) establish a process by which the Secretary may 
                add the prescription drug products or transactions that 
                are exempt from the requirements of this section.
          ``(4) Grandfathered persons and prescription drug products.--
                  ``(A) In general.--Not later than one year after the 
                date of the enactment of the Safeguarding America's 
                Pharmaceuticals Act of 2013, the Secretary shall 
                specify, by regulation, whether and under what 
                circumstances the prescription drug product identifier 
                requirement under paragraph (2) of subsections (b), 
                (c), (d), and (e) shall apply to a prescription drug 
                product that is in the supply chain or in a 
                manufacturer's inventory on the date of the enactment 
                of the Safeguarding America's Pharmaceuticals Act of 
                2013.
                  ``(B) Third-party logistics provider licenses.--Until 
                the date that is 1 year after the effective date of the 
                third-party logistics provider licensing requirements 
                under section 584, a third-party logistics provider 
                shall be considered `licensed' under section 581(6)(B) 
                unless the Secretary has made a finding that the third-
                party logistics provider does not utilize good handling 
                and distribution practices and publishes notice 
                thereof.
                  ``(C) Label changes.--Changes made to package labels 
                solely to incorporate the prescription drug product 
                identifier may be submitted to the Secretary in the 
                annual report of an establishment, in accordance with 
                section 314.70(d) of chapter 21, Code of Federal 
                Regulations (or any successor regulation).
  ``(b) Manufacturer Requirements.--
          ``(1) Prescription drug product tracing.--
                  ``(A) In general.--Beginning not later than January 
                1, 2015, a manufacturer shall--
                          ``(i) prior to, or at the time of, each 
                        transaction in which such manufacturer 
                        transfers ownership of a prescription drug 
                        product, provide the subsequent owner with the 
                        transaction history and a transaction 
                        statement; and
                          ``(ii) maintain the transaction information 
                        for each such transaction for not less than 3 
                        years after the date of the transaction.
                  ``(B) Requests for information.--Upon a request by 
                the Secretary or other appropriate Federal or State 
                official, in the event of a recall or for the purpose 
                of investigating a suspect prescription drug product or 
                an illegitimate prescription drug product, a 
                manufacturer shall, not later than 2 business days 
                after receiving the request or in such reasonable time 
                as determined by the Secretary, provide to the 
                Secretary or other official, the applicable transaction 
                history and transaction statement for the prescription 
                drug product.
          ``(2) Prescription drug product identifier.--Beginning not 
        later than 5 years after the date of the enactment of the 
        Safeguarding America's Pharmaceuticals Act of 2013, a 
        manufacturer shall affix or imprint a prescription drug product 
        identifier on each package and homogenous case of a 
        prescription drug product intended to be introduced in a 
        transaction. Such manufacturer shall maintain the information 
        in the prescription drug product identifier for such 
        prescription drug product for not less than 3 years after the 
        date of the transaction.
          ``(3) Authorized trading partners.--Beginning not later than 
        January 1, 2015, a manufacturer shall ensure that each of its 
        trading partners is authorized.
          ``(4) List of authorized distributors of record.--Beginning 
        not later than January 1, 2015, each manufacturer of a 
        prescription drug shall--
                  ``(A) maintain a list of the authorized distributors 
                of record of such drug at the corporate offices of such 
                manufacturer;
                  ``(B) make such list publicly available, including 
                placement on the Internet Website of such manufacturer; 
                and
                  ``(C) update such list not less than once per 
                quarter.
          ``(5) Verification.--Beginning not later than January 1, 
        2015, a manufacturer shall implement systems and processes to 
        enable the manufacturer to comply with the following 
        requirements:
                  ``(A) Suspect prescription drug product.--
                          ``(i) In general.--Upon making a 
                        determination that a prescription drug product 
                        in the possession or control of the 
                        manufacturer is a suspect prescription drug 
                        product, or upon receiving a request for 
                        verification from the Secretary that a 
                        prescription drug product within the possession 
                        or control of a manufacturer is a suspect 
                        prescription drug product, a manufacturer shall 
                        promptly conduct an investigation in 
                        coordination with trading partners, as 
                        applicable, to determine whether the 
                        prescription drug product is an illegitimate 
                        prescription drug product. Beginning not later 
                        than 5 years after the date of the enactment of 
                        the Safeguarding America's Pharmaceuticals Act 
                        of 2013, such investigation shall include--
                                  ``(I) verifying the prescription drug 
                                product at the package level;
                                  ``(II) validating any applicable 
                                transaction history in the possession 
                                of the manufacturer; and
                                  ``(III) otherwise investigating to 
                                determine whether the prescription drug 
                                product is an illegitimate prescription 
                                drug product.
                          ``(ii) Cleared prescription drug product.--If 
                        the manufacturer determines that a suspect 
                        prescription drug product is not an 
                        illegitimate prescription drug product, the 
                        manufacturer shall promptly notify the 
                        Secretary of such determination and such 
                        prescription drug product may be further 
                        distributed.
                          ``(iii) Records.--A manufacturer shall keep 
                        records of its investigation of a suspect 
                        prescription drug product for not less than 3 
                        years after the conclusion of the 
                        investigation.
                  ``(B) Illegitimate prescription drug product.--
                          ``(i) In general.--Upon determining that a 
                        prescription drug product in the possession or 
                        control of a manufacturer is an illegitimate 
                        prescription drug product, the manufacturer 
                        shall--
                                  ``(I) quarantine such prescription 
                                drug product from prescription drug 
                                product intended for distribution; and
                                  ``(II) provide for the disposition of 
                                the illegitimate prescription drug 
                                product.
                          ``(ii) Trading partner.--Upon determining 
                        that a prescription drug product in the 
                        possession or control of a trading partner is 
                        an illegitimate prescription drug product, the 
                        manufacturer shall take reasonable steps to 
                        assist a trading partner to provide for the 
                        disposition of the illegitimate prescription 
                        drug product.
                          ``(iii) Making a notification.--Upon 
                        determining that a prescription drug product in 
                        the possession or control of the manufacturer 
                        is an illegitimate prescription drug product, 
                        the manufacturer shall notify the Secretary of 
                        such determination not later than 24 hours 
                        after making such determination. The Secretary 
                        shall determine whether additional trading 
                        partner notification is appropriate.
                          ``(iv) Responding to a notification.--Upon 
                        the receipt of a notification from the 
                        Secretary that a determination has been made 
                        that a prescription drug product is an 
                        illegitimate prescription drug product, a 
                        manufacturer shall--
                                  ``(I) identify all illegitimate 
                                prescription drug products that are 
                                subject to such notification and in the 
                                possession or control of the 
                                manufacturer, including any 
                                prescription drug product that is 
                                subsequently received; and
                                  ``(II) perform the activities 
                                described in clause (i).
                          ``(v) Records.--A manufacturer shall keep 
                        records of the disposition of an illegitimate 
                        prescription drug product for not less than 3 
                        years after the conclusion of the disposition.
                  ``(C) Electronic database.--A manufacturer may 
                satisfy the requirements of this paragraph through the 
                use of a secure electronic database developed and 
                operated by the manufacturer or another entity. The 
                owner of such database shall establish the requirements 
                and processes to respond to requests and may provide 
                for data access to other members of the pharmaceutical 
                distribution supply chain, as appropriate. The 
                development and operation of such a database shall not 
                relieve a manufacturer of the requirement under this 
                paragraph to respond to a verification request 
                submitted by means other than a secure electronic 
                database.
                  ``(D) Returned prescription drug product.--Beginning 
                not later than 5 years after the date of the enactment 
                of the Safeguarding America's Pharmaceuticals Act of 
                2013, upon receipt of a returned prescription drug 
                product that the manufacturer intends to further 
                distribute, before further distributing such 
                prescription drug product, the manufacturer shall--
                          ``(i) verify the prescription drug product 
                        identifier for each sealed homogeneous case of 
                        such prescription drug product; or
                          ``(ii) if such prescription drug product is 
                        not in a sealed homogeneous case, verify the 
                        prescription drug product identifier on each 
                        package.
  ``(c) Wholesale Distributor Requirements.--
          ``(1) Prescription drug product tracing.--
                  ``(A) In general.--Beginning not later than April 1, 
                2015, a wholesale distributor shall--
                          ``(i) not accept ownership of a prescription 
                        drug product unless the previous owner prior 
                        to, or at the time of, the transaction provides 
                        the applicable transaction history and a 
                        transaction statement for the prescription drug 
                        product;
                          ``(ii) prior to, or at the time of, each 
                        transaction in which the wholesale distributor 
                        transfers ownership of a prescription drug 
                        product--
                                  ``(I) in the case that the wholesale 
                                distributor purchased the prescription 
                                drug product directly from the 
                                manufacturer, provide the subsequent 
                                owner with transaction history and a 
                                transaction statement for the 
                                prescription drug product; or
                                  ``(II) in the case that the wholesale 
                                distributor did not purchase the 
                                prescription drug product directly from 
                                the manufacturer, the exclusive 
                                distributor of the manufacturer, or a 
                                repackager that purchased directly from 
                                the manufacturer, provide the 
                                subsequent owner with transaction 
                                history beginning with the wholesale 
                                distributor that did purchase the 
                                product directly from the manufacturer, 
                                the exclusive distributor of the 
                                manufacturer, or a repackager that 
                                purchased directly from the 
                                manufacturer;
                          ``(iii) notwithstanding clause (ii), if the 
                        wholesale distributor purchased the 
                        prescription drug product directly from the 
                        manufacturer, its exclusive distributor, or a 
                        repackager that purchased directly from the 
                        manufacturer or its authorized distributor of 
                        record--
                                  ``(I) provide an initial purchase 
                                transaction statement on the invoice to 
                                the customer, stating that the 
                                wholesale distributor purchased the 
                                prescription drug product package 
                                directly from the manufacturer, 
                                exclusive distributor, or repackager;
                                  ``(II) make available to the 
                                immediate subsequent recipient of such 
                                prescription drug product the 
                                information required under clause (ii) 
                                through any combination of self-
                                generated paper, electronic data, or 
                                manufacturer-provided information on 
                                the prescription drug product package; 
                                and
                                  ``(III) for purposes of subclauses 
                                (I) and (II), need not include any 
                                transactions occurring before the 
                                transfer of the prescription drug 
                                product to the wholesale distributor; 
                                and
                          ``(iv) maintain the transaction information 
                        for each transaction described in clauses (i) 
                        and (ii) for not less than 3 years after the 
                        transaction.
                  ``(B) Returns exception.--
                          ``(i) Saleable returns.--Notwithstanding 
                        subparagraph (A), a wholesale distributor may--
                                  ``(I) accept returned prescription 
                                drug product without a transaction 
                                history from a dispenser or repackager; 
                                and
                                  ``(II) distribute such returned 
                                prescription drug product with a 
                                transaction history that begins with 
                                the wholesale distributor that so 
                                accepted the returned product.
                          ``(ii) Nonsaleable returns.--A wholesale 
                        distributor may return a nonsaleable 
                        prescription drug to the manufacturer or 
                        repackager, to the wholesale distributor from 
                        whom such prescription drug was purchased, or 
                        to a person acting on behalf of such a person, 
                        including a returns processor, without 
                        providing the information required under 
                        subparagraph (A).
                  ``(C) Requests for information.--Upon a request by 
                the Secretary or other appropriate Federal or State 
                official, in the event of a recall or for the purpose 
                of investigating a suspect prescription drug product or 
                an illegitimate prescription drug product a wholesale 
                distributor shall, not later than 2 business days after 
                receiving the request or in such other reasonable time 
                as determined by the Secretary, provide the applicable 
                transaction history and transaction statements for the 
                prescription drug product.
          ``(2) Prescription drug product identifier.--Beginning not 
        later than 7 years after the date of the enactment of the 
        Safeguarding America's Pharmaceuticals Act of 2013, a wholesale 
        distributor may engage in transactions involving a prescription 
        drug product only if such prescription drug product is encoded 
        with a prescription drug product identifier, except as provided 
        in subsection (a)(4).
          ``(3) Authorized trading partners.--Beginning not later than 
        January 1, 2015, a wholesale distributor shall ensure that each 
        of its trading partners is authorized.
          ``(4) Verification.--Beginning not later than April 1, 2015, 
        a wholesale distributor shall implement systems to enable the 
        wholesale distributor to comply with the following 
        requirements:
                  ``(A) Suspect prescription drug product.--
                          ``(i) In general.--Upon making a 
                        determination that a prescription drug product 
                        in the possession or control of the wholesale 
                        distributor is a suspect prescription drug 
                        product, or upon receiving a request for 
                        verification from the Secretary that a 
                        prescription drug product within the possession 
                        or control of a wholesale distributor is a 
                        suspect prescription drug product, a wholesale 
                        distributor shall promptly conduct an 
                        investigation to determine whether the 
                        prescription drug product is an illegitimate 
                        prescription drug product. Beginning not later 
                        than 7 years after the date of the enactment of 
                        the Safeguarding America's Pharmaceuticals Act 
                        of 2013, such investigation shall include--
                                  ``(I) verifying a package of the 
                                prescription drug product;
                                  ``(II) validating any applicable 
                                transaction history in the possession 
                                of the wholesale distributor; and
                                  ``(III) otherwise investigating to 
                                determine whether the prescription drug 
                                product is an illegitimate prescription 
                                drug product.
                          ``(ii) Cleared prescription drug product.--If 
                        the wholesale distributor determines that a 
                        suspect prescription drug product is not an 
                        illegitimate prescription drug product, the 
                        wholesale distributor shall promptly notify the 
                        Secretary of such determination and such 
                        prescription drug product may be further 
                        distributed.
                          ``(iii) Records.--A wholesale distributor 
                        shall keep records of its investigation of a 
                        suspect prescription drug product for not less 
                        than 3 years after the conclusion of the 
                        investigation.
                  ``(B) Illegitimate prescription drug product.--
                          ``(i) In general.--Upon receiving notice that 
                        a manufacturer of a prescription drug product 
                        has determined that a prescription drug product 
                        in the possession or control of a wholesale 
                        distributor is an illegitimate prescription 
                        drug product, the wholesale distributor shall--
                                  ``(I) quarantine such prescription 
                                drug product within the possession or 
                                control of the wholesale distributor 
                                from prescription drug product intended 
                                for distribution; and
                                  ``(II) provide for the disposition of 
                                the illegitimate prescription drug 
                                product within the possession or 
                                control of the wholesale distributor.
                          ``(ii) Trading partner.--Upon determining 
                        that a prescription drug product in the 
                        possession or control of a trading partner is 
                        an illegitimate prescription drug product, the 
                        wholesale distributor shall take reasonable 
                        steps to assist a trading partner to provide 
                        for the disposition of the illegitimate 
                        prescription drug product.
                          ``(iii) Making a notification.--Upon 
                        determining that a prescription drug product in 
                        the possession or control of the wholesale 
                        distributor is an illegitimate prescription 
                        drug product, the wholesale distributor shall 
                        notify the Secretary of such determination not 
                        later than 24 hours after making such 
                        determination. The Secretary shall determine 
                        whether additional trading partner notification 
                        is appropriate.
                          ``(iv) Responding to a notification.--Upon 
                        the receipt of a notification from the 
                        Secretary that a determination has been made 
                        that a prescription drug product is an 
                        illegitimate prescription drug product, a 
                        wholesale distributor shall--
                                  ``(I) identify all illegitimate 
                                prescription drug product subject to 
                                such notification that is in the 
                                possession or control of the wholesale 
                                distributor, including any prescription 
                                drug product that is subsequently 
                                received; and
                                  ``(II) perform the activities 
                                described in clause (i).
                          ``(v) Records.--A wholesale distributor shall 
                        keep records of the disposition of an 
                        illegitimate prescription drug product for not 
                        less than 3 years after the conclusion of the 
                        disposition.
                  ``(C) Electronic database.--A wholesale distributor 
                may satisfy the requirements of this paragraph through 
                the use of a secure electronic database developed and 
                operated by the manufacturer or another entity. The 
                owner of such database shall establish the requirements 
                and processes to respond to requests and may provide 
                for data access to other members of the pharmaceutical 
                distribution supply chain, as appropriate. The 
                development and operation of such a database shall not 
                relieve a wholesale distributor of the requirement 
                under this paragraph to respond to a verification 
                request submitted by means other than a secure 
                electronic database.
                  ``(D) Returned prescription drug product.--Beginning 
                not later than 7 years after the date of the enactment 
                of the Safeguarding America's Pharmaceuticals Act of 
                2013, upon receipt of a returned prescription drug 
                product that the wholesale distributor intends to 
                further distribute, before further distributing such 
                prescription drug product, the wholesale distributor 
                shall--
                          ``(i) verify the prescription drug product 
                        identifier for each sealed homogeneous case of 
                        such prescription drug product; or
                          ``(ii) if such prescription drug product is 
                        not in a sealed homogeneous case, verify the 
                        prescription drug product identifier on each 
                        package.
  ``(d) Dispenser Requirements.--
          ``(1) Prescription drug product tracing.--
                  ``(A) In general.--Beginning not later than July 1, 
                2015, a dispenser--
                          ``(i) shall not accept ownership of a 
                        prescription drug product, unless the previous 
                        owner prior to, or at the time of, the 
                        transaction, provides transaction history and a 
                        transaction statement;
                          ``(ii) prior to, or at the time of, each 
                        transaction in which the dispenser transfers 
                        ownership of a prescription drug product (but 
                        not including dispensing to a patient or 
                        returns) shall provide the subsequent owner 
                        with transaction history and a transaction 
                        statement for the prescription drug product, 
                        except that the requirements of this clause 
                        shall not apply to sales by a dispenser to 
                        another dispenser to fulfill a specific patient 
                        need; and
                          ``(iii) shall maintain transaction 
                        information for a period of not less than 3 
                        years after the date of the transaction.
                  ``(B) Agreements with third parties.--A dispenser may 
                enter into a written agreement with a third party, 
                including an authorized wholesale distributor, under 
                which the third party confidentially maintains the 
                transaction information required to be maintained under 
                this subsection on behalf of the dispenser. If a 
                dispenser enters into such an agreement, the dispenser 
                shall maintain a copy of the written agreement.
                  ``(C) Returns exception.--
                          ``(i) Saleable returns.--Notwithstanding 
                        subparagraph (A)(ii), a dispenser may return 
                        prescription drug product to the trading 
                        partner from which the dispenser obtained the 
                        prescription drug product without providing the 
                        information required under such subparagraph.
                          ``(ii) Nonsaleable returns.--Notwithstanding 
                        subparagraph (A)(ii), a dispenser may return a 
                        nonsaleable prescription drug to the 
                        manufacturer or repackager, to the wholesale 
                        distributor from whom such prescription drug 
                        was purchased, to a returns processor, or to a 
                        person acting on behalf of such persons without 
                        providing the information required under such 
                        subparagraph.
                  ``(D) Requests for information.--Upon a request by 
                the Secretary or other appropriate Federal or State 
                official, in the event of a recall or for the purpose 
                of investigating a suspect prescription drug product or 
                an illegitimate prescription drug product, a dispenser 
                shall, not later than 2 business days after receiving 
                the request or in another such reasonable time as 
                determined by the Secretary, provide lot level 
                transaction information.
          ``(2) Prescription drug product identifier.--Beginning not 
        later than 8 years after the date of the enactment of the 
        Safeguarding America's Pharmaceuticals Act of 2013, a dispenser 
        may engage in transactions involving a prescription drug 
        product only if such prescription drug product is encoded with 
        a prescription drug product identifier, except as provided in 
        subsection (a)(4).
          ``(3) Authorized trading partners.--Beginning not later than 
        January 1, 2015, a dispenser shall ensure that each of its 
        trading partners is authorized.
          ``(4) Verification.--Beginning not later than January 1, 
        2015, a dispenser shall implement systems to enable the 
        dispenser to comply with the following requirements:
                  ``(A) Suspect prescription drug product.--
                          ``(i) In general.--Upon making a 
                        determination that a prescription drug product 
                        in the possession or control of the dispenser 
                        is a suspect prescription drug product, or upon 
                        receiving a request for verification from the 
                        Secretary that a prescription drug product 
                        within the possession or control of a dispenser 
                        is a suspect prescription drug product, a 
                        dispenser shall promptly conduct an 
                        investigation to determine whether the 
                        prescription drug product is an illegitimate 
                        prescription drug product. Such investigation 
                        shall include--
                                  ``(I) verifying whether the lot 
                                number of a suspect prescription drug 
                                product corresponds with the lot number 
                                for such prescription drug product;
                                  ``(II) beginning 8 years after the 
                                date of the enactment of the 
                                Safeguarding America's Pharmaceuticals 
                                Act of 2013, verifying that the product 
                                identifier of at least 3 packages or 10 
                                percent of such suspect prescription 
                                drug product, whichever is greater, or 
                                all packages, if there are fewer than 
                                3, corresponds with the prescription 
                                drug product identifier for such 
                                product;
                                  ``(III) validating any applicable 
                                transaction history in the possession 
                                of the dispenser; and
                                  ``(IV) otherwise investigating to 
                                determine whether the prescription drug 
                                product is an illegitimate prescription 
                                drug product.
                          ``(ii) Cleared prescription drug product.--If 
                        the dispenser makes the determination that a 
                        suspect prescription drug product is not an 
                        illegitimate prescription drug product, the 
                        dispenser shall promptly notify the Secretary 
                        of such determination and such prescription 
                        drug product may be further dispensed.
                          ``(iii) Records.--A dispenser shall keep 
                        records of its investigation of a suspect 
                        prescription drug product for not less than 3 
                        years after the conclusion of the 
                        investigation.
                  ``(B) Illegitimate prescription drug product.--
                          ``(i) In general.--Upon receiving notice that 
                        a manufacturer of a prescription drug product 
                        has determined that a prescription drug product 
                        in the possession or control of a dispenser is 
                        an illegitimate prescription drug product, the 
                        dispenser shall--
                                  ``(I) quarantine such prescription 
                                drug product within the possession or 
                                control of the dispenser from 
                                prescription drug product intended for 
                                distribution; and
                                  ``(II) provide for the disposition of 
                                the illegitimate prescription drug 
                                product within the possession or 
                                control of the dispenser.
                          ``(ii) Trading partners.--Upon determining 
                        that a prescription drug product in the 
                        possession or control of a trading partner is 
                        an illegitimate prescription drug product, the 
                        dispenser shall take reasonable steps to assist 
                        a trading partner to provide for the 
                        disposition of the illegitimate prescription 
                        drug product.
                          ``(iii) Making a notification.--Upon 
                        determining that a prescription drug product in 
                        the possession or control of the dispenser is 
                        an illegitimate prescription drug product, the 
                        dispenser shall notify the Secretary of such 
                        determination not later than 24 hours after 
                        making such determination. The Secretary shall 
                        determine whether additional trading partner 
                        notification is appropriate.
                          ``(iv) Responding to a notification.--Upon 
                        the receipt of a notification from the 
                        Secretary that a determination has been made 
                        that a prescription drug product is an 
                        illegitimate prescription drug product, a 
                        dispenser shall--
                                  ``(I) identify all illegitimate 
                                prescription drug products that are 
                                subject to such notification and in the 
                                possession or control of the dispenser, 
                                including any prescription drug product 
                                that is subsequently received; and
                                  ``(II) perform the activities 
                                described in clause (i).
                          ``(v) Records.--A dispenser shall keep 
                        records of the disposition of an illegitimate 
                        prescription drug product for not less than 3 
                        years after the conclusion of the disposition.
                  ``(C) Electronic database.--A dispenser may satisfy 
                the requirements of this paragraph through the use of a 
                secure electronic database developed and operated by 
                the manufacturer or another entity. The owner of such 
                database shall establish the requirements and processes 
                to enable responding to requests and may provide for 
                data access to other members of the pharmaceutical 
                distribution supply chain, as appropriate. The 
                development and operation of such a database shall not 
                relieve a dispenser of the requirement under this 
                paragraph to respond to a verification request 
                submitted by means other than a secure electronic 
                database.
  ``(e) Repackager Requirements.--
          ``(1) Prescription drug product tracing.--
                  ``(A) In general.--Beginning not later than April 1, 
                2015, with respect to a prescription drug product 
                received by a repackager from a wholesale distributor, 
                and beginning not later than January 1, 2015, with 
                respect to any other prescription drug product, a 
                repackager shall--
                          ``(i) not accept ownership of a prescription 
                        drug product unless the previous owner, prior 
                        to, or at the time of, the transaction, 
                        provides transaction history and a transaction 
                        statement for the prescription drug product;
                          ``(ii) prior to, or at the time of, each 
                        transaction in which the repackager transfers 
                        ownership of a prescription drug product, 
                        provide the subsequent owner with transaction 
                        history and a transaction statement;
                          ``(iii) maintain the transaction information 
                        for each transaction described in clause (i) or 
                        (ii) for not less than 3 years after the 
                        transaction; and
                          ``(iv) maintain records that allow the 
                        repackager to associate the prescription drug 
                        product identifier the repackager affixes or 
                        imprints with the prescription drug product 
                        identifier assigned by the original 
                        manufacturer of the prescription drug product.
                  ``(B) Nonsaleable returns.--Notwithstanding 
                subparagraph (A)(ii), a repackager may return 
                prescription drug product to the trading partner from 
                whom the repackager obtained the prescription drug 
                product without providing the information required 
                under such subparagraph.
                  ``(C) Requests for information.--Upon a request by 
                the Secretary or other appropriate Federal or State 
                official, in the event of a recall or for the purpose 
                of investigating a suspect prescription drug product or 
                an illegitimate prescription drug product, a repackager 
                shall, not later than 2 business days after receiving 
                the request or in such other reasonable time as 
                determined by the Secretary, provide the applicable 
                transaction history and transaction statement for the 
                prescription drug product.
          ``(2) Prescription drug product identifier.--Beginning not 
        later than 6 years after the date of the enactment of the 
        Safeguarding America's Pharmaceuticals Act of 2013, a 
        repackager--
                  ``(A) shall affix or imprint a prescription drug 
                product identifier to each package and homogenous case 
                of prescription drug product intended to be introduced 
                in a transaction;
                  ``(B) shall maintain the prescription drug product 
                identifier for such prescription drug product for not 
                less than 3 years after the date of the transaction; 
                and
                  ``(C) may engage in transactions involving a 
                prescription drug product only if such prescription 
                drug product is encoded with a prescription drug 
                product identifier except as provided in subsection 
                (a)(4).
          ``(3) Authorized trading partners.--Beginning on January 1, 
        2015, a repackager shall ensure that each of its trading 
        partners is authorized.
          ``(4) Verification.--Beginning not later than January 1, 
        2015, a repackager shall implement systems to enable the 
        repackager to comply with the following requirements:
                  ``(A) Suspect prescription drug product.--
                          ``(i) In general.--Upon making a 
                        determination that a prescription drug product 
                        in the possession or control of the repackager 
                        is a suspect prescription drug product, or upon 
                        receiving a request for verification from the 
                        Secretary that a prescription drug product 
                        within the possession or control of a 
                        repackager is a suspect prescription drug 
                        product, a repackager shall promptly conduct an 
                        investigation to determine whether the 
                        prescription drug product is an illegitimate 
                        prescription drug product, including--
                                  ``(I) beginning not later than 6 
                                years after the date of the enactment 
                                of the Safeguarding America's 
                                Pharmaceuticals Act of 2013, verifying 
                                the prescription drug product at the 
                                package level;
                                  ``(II) validating any applicable 
                                transaction information in the 
                                possession of the repackager; and
                                  ``(III) otherwise investigating to 
                                determine whether the prescription drug 
                                product is an illegitimate prescription 
                                drug product.
                          ``(ii) Cleared prescription drug product.--If 
                        the repackager determines that a suspect 
                        prescription drug product is not an 
                        illegitimate prescription drug product, the 
                        repackager shall promptly notify the Secretary 
                        of such determination and such prescription 
                        drug product may be further distributed.
                          ``(iii) Records.--A repackager shall keep 
                        records of its investigation of a suspect 
                        prescription drug product for not less than 3 
                        years after the conclusion of the 
                        investigation.
                  ``(B) Illegitimate prescription drug product.--
                          ``(i) In general.--Upon receiving notice that 
                        a manufacturer of a prescription drug product 
                        has determined that a prescription drug product 
                        in the possession or control of a repackager is 
                        an illegitimate prescription drug product, the 
                        repackager shall--
                                  ``(I) quarantine such prescription 
                                drug product within the possession or 
                                control of the repackager from 
                                prescription drug product intended for 
                                distribution; and
                                  ``(II) provide for the disposition of 
                                the illegitimate prescription drug 
                                product within the possession or 
                                control of the repackager.
                          ``(ii) Trading partner.--Upon determining 
                        that a prescription drug product in the 
                        possession or control of a trading partner is 
                        an illegitimate prescription drug product, the 
                        repackagers shall take reasonable steps to 
                        assist the trading partner to provide for the 
                        disposition of the illegitimate prescription 
                        drug product.
                          ``(iii) Making a notification.--Upon 
                        determining that a prescription drug product in 
                        the possession or control of the repackager is 
                        an illegitimate prescription drug product, the 
                        repackager shall notify the Secretary of such 
                        determination not later than 24 hours after 
                        making such determination. The Secretary shall 
                        determine whether additional trading partner 
                        notification is appropriate.
                          ``(iv) Responding to a notification.--Upon 
                        the receipt of a notification from the 
                        Secretary that a determination has been made 
                        that a prescription drug product is an 
                        illegitimate prescription drug product, a 
                        repackager shall--
                                  ``(I) identify all illegitimate 
                                prescription drug products that are 
                                subject to such notification and in the 
                                possession or control of the 
                                repackager, including any prescription 
                                drug product that is subsequently 
                                received; and
                                  ``(II) perform the activities 
                                described in clause (i).
                          ``(v) Records.--A repackager shall keep 
                        records of the disposition of an illegitimate 
                        prescription drug product for not less than 3 
                        years after the conclusion of the disposition.
                  ``(C) Electronic database.--A repackager may satisfy 
                the requirements of this paragraph through the use of a 
                secure electronic database developed and operated by 
                the manufacturer or another entity. The owner of such 
                database shall establish the requirements and processes 
                to respond to requests and may provide for data access 
                to other members of the pharmaceutical distribution 
                supply chain, as appropriate. The development and 
                operation of such a database shall not relieve a 
                repackager of the requirement under this paragraph to 
                respond to a verification request submitted by means 
                other than a secure electronic database.
                  ``(D) Returned prescription drug product.--Beginning 
                not later than 6 years after the date of the enactment 
                of the Safeguarding America's Pharmaceuticals Act of 
                2013, upon receipt of a returned prescription drug 
                product that the repackager intends to further 
                distribute, before further distributing such 
                prescription drug product, the repackager shall--
                          ``(i) verify the prescription drug product 
                        identifier for each sealed homogeneous case of 
                        such prescription drug product; or
                          ``(ii) if such prescription drug product is 
                        not in a sealed homogeneous case, verify the 
                        prescription drug product identifier on each 
                        package.
  ``(f) Third-Party Logistics Provider Requirements.--
          ``(1) Authorized trading partners.--Beginning on January 1, 
        2015, a third-party logistics provider shall ensure that each 
        of its trading partners is authorized.
          ``(2) Verification.--Beginning not later than January 1, 
        2015, a third-party logistics provider shall implement systems 
        to enable the third-party logistics provider to comply with the 
        following requirements:
                  ``(A) Suspect prescription drug product.--
                          ``(i) In general.--Upon making a 
                        determination that a prescription drug product 
                        in the possession or control of a third-party 
                        logistics provider is a suspect prescription 
                        drug product, a third-party logistics provider 
                        shall promptly notify the owner of such 
                        prescription drug product of the need to 
                        conduct an investigation to determine whether 
                        the prescription drug product is an 
                        illegitimate prescription drug product.
                          ``(ii) Cleared prescription drug product.--If 
                        the owner of the prescription drug product 
                        notifies the third-party logistics provider of 
                        the determination that a suspect prescription 
                        drug product is not an illegitimate 
                        prescription drug product, such prescription 
                        drug product may be further distributed.
                          ``(iii) Records.--A third-party logistics 
                        provider shall keep records of the activities 
                        described in clauses (i) and (ii) with respect 
                        to a suspect prescription drug product for not 
                        less than 3 years after the conclusion of the 
                        investigation.
                  ``(B) Illegitimate prescription drug product.--
                          ``(i) In general.--Upon receiving notice that 
                        a manufacturer of a prescription drug product 
                        has determined that a prescription drug product 
                        in the possession or control of a third-party 
                        logistics provider is an illegitimate 
                        prescription drug product, the third-party 
                        logistics provider shall--
                                  ``(I) quarantine such prescription 
                                drug product within the possession or 
                                control of the third-party logistics 
                                provider from prescription drug product 
                                intended for distribution;
                                  ``(II) promptly notify the owner of 
                                such prescription drug product of the 
                                need to provide for the disposition of 
                                such prescription drug product; and
                                  ``(III) promptly transfer possession 
                                of the prescription drug product to the 
                                owner of such prescription drug product 
                                to provide for the disposition of the 
                                prescription drug product.
                          ``(ii) Making a notification.--Upon 
                        determining that a prescription drug product in 
                        the possession or control of the third-party 
                        logistics provider is an illegitimate 
                        prescription drug product, the third-party 
                        logistics provider shall notify the Secretary 
                        not later than 24 hours after making such 
                        determination. The Secretary shall determine 
                        whether additional trading partner notification 
                        is appropriate.
                          ``(iii) Responding to a notification.--Upon 
                        the receipt of a notification from the 
                        Secretary, a third-party logistics provider 
                        shall--
                                  ``(I) identify all illegitimate 
                                prescription drug product subject to 
                                such notification that is in the 
                                possession or control of the third-
                                party logistics provider, including any 
                                prescription drug product that is 
                                subsequently received; and
                                  ``(II) perform the activities 
                                described in clause (i).
                          ``(iv) Records.--A third-party logistics 
                        provider shall keep records of the activities 
                        described in clauses (i) and (ii) with respect 
                        to an illegitimate prescription drug product 
                        for not less than 3 years after the conclusion 
                        of the disposition.
  ``(g) Drop Shipments.--This section does not apply to any entity, 
notwithstanding its status as a wholesale distributor or repackager, or 
other status that is not involved in the physical handling, 
distribution, or storage of a prescription drug product. For purposes 
of this subsection, facilitating the distribution of a prescription 
drug product by providing various administrative services, including 
processing of orders and payments, shall not, by itself, be construed 
as being involved in the handling, distribution, or storage of a 
prescription drug product.''.

SEC. 3. ENHANCED DRUG DISTRIBUTION SECURITY.

  (a) Pilot Projects.--
          (1) In general.--Not later than 2 years after the date of the 
        enactment of this Act, the Secretary shall establish one or 
        more pilot projects in coordination with manufacturers, 
        repackagers, wholesale distributors, third-party logistics 
        providers, and dispensers to explore and evaluate methods to 
        enhance the safety and security of the pharmaceutical 
        distribution supply chain.
          (2) Content.--
                  (A) In general.--The Secretary shall ensure that the 
                pilot projects under paragraph (1) collectively--
                          (i) reflect the diversity of the 
                        pharmaceutical distribution supply chain; and
                          (ii) include participants representative of 
                        every sector within the pharmaceutical 
                        distribution supply chain, including 
                        participants representative of small 
                        businesses.
                  (B) Project design.--The pilot projects shall be 
                designed to--
                          (i) utilize the prescription drug product 
                        identifier for tracing of a prescription drug 
                        product, which utilization may include--
                                  (I) verification of the prescription 
                                drug product identifier of a 
                                prescription drug product; and
                                  (II) the use of aggregation and 
                                inference;
                          (ii) improve the technical capabilities of 
                        each sector within the pharmaceutical supply 
                        chain to comply with systems and processes 
                        needed to utilize the prescription drug product 
                        identifiers to enhance tracing of a 
                        prescription drug product; and
                          (iii) conduct such other activities as the 
                        Secretary determines appropriate to explore and 
                        evaluate methods to enhance the safety and 
                        security of the pharmaceutical distribution 
                        supply chain.
  (b) Public Meetings.--
          (1) In general.--Not later than 6 months after the date of 
        the enactment of this Act, and at least every 6 months 
        thereafter until the submission of the report required by 
        subsection (e)(2), the Secretary shall hold a public meeting to 
        enhance the safety and security of the pharmaceutical 
        distribution supply chain. In conducting such meetings, the 
        Secretary shall take all measures reasonable and practicable to 
        ensure the protection of confidential commercial information 
        and trade secrets.
          (2) Content.--In conducting meetings under this subsection, 
        the Secretary shall seek to address, in at least one such 
        meeting, each of the following topics:
                  (A) Best practices in each of the sectors within the 
                pharmaceutical distribution supply chain to implement 
                the requirements of section 582 of the Federal Food, 
                Drug, and Cosmetic Act, as added by section 2.
                  (B) The costs and benefits of implementation of such 
                section 582, including the impact on each 
                pharmaceutical distribution supply chain sector and on 
                public health.
                  (C) Whether additional electronic traceability 
                requirements, including tracing of prescription drug 
                product at the package level, are feasible, cost 
                effective, overly burdensome on small businesses, and 
                needed to protect public health.
                  (D) The systems and processes needed to utilize the 
                prescription drug product identifiers to enhance 
                tracing of prescription drug product at the package 
                level.
                  (E) The technical capabilities and legal authorities, 
                if any, needed to establish an electronic system that 
                provides for enhanced tracing of prescription drug 
                product at the package level.
                  (F) The impact that the requirements, systems, 
                processes, capabilities, and legal authorities referred 
                to in subparagraphs (C), (D), and (E) would have on 
                patient safety, the drug supply, cost and regulatory 
                burden, the timeliness of patient access to 
                prescription drugs, and small businesses.
  (c) Study of the Pharmaceutical Distribution Supply Chain.--
          (1) In general.--The Comptroller General of the United States 
        shall conduct a study to examine implementation of the 
        requirements established under subchapter H of chapter V of the 
        Federal Food, Drug, and Cosmetic Act, as added by section 2, in 
        order to inform the regulations promulgated under this section.
          (2) Consideration.--In conducting the study under this 
        subsection, the Comptroller General shall provide for 
        stakeholder input and shall consider the following:
                  (A) The implementation of the requirements 
                established under such subchapter H with respect to--
                          (i) the ability of the health care system 
                        collectively to maintain patient access to 
                        medicines;
                          (ii) the scalability of such requirements, 
                        including with respect to prescription drug 
                        product lines; and
                          (iii) the capability of different sectors 
                        within the pharmaceutical distribution supply 
                        chain, including small businesses, to affix and 
                        utilize the prescription drug product 
                        identifier.
                  (B) The need for additional legal authorities and 
                activities to address additional gaps in the 
                pharmaceutical distribution supply chain, if any, after 
                the implementation of the requirements established 
                under such subchapter H with respect to--
                          (i) the systems and processes needed to 
                        enhance tracing of prescription drug product at 
                        the package level;
                          (ii) the impact, feasibility, and cost 
                        effectiveness that additional requirements 
                        pursuant to this section would have on each 
                        pharmaceutical distribution supply chain sector 
                        and the public health; and
                          (iii) the systems and processes needed to 
                        enhance interoperability among trading 
                        partners.
                  (C) Risks to the security and privacy of data 
                collected, maintained, or exchanged pursuant to the 
                requirements established under such subchapter H.
  (d) Small Dispensers.--
          (1) In general.--Not later than 10 years after the date of 
        the enactment of this Act, the Secretary shall enter into a 
        contract with a private, independent consulting firm with 
        relevant expertise to conduct a technology and software study 
        on the feasibility of dispensers that have 25 or fewer full-
        time employees conducting interoperable, electronic tracing of 
        prescription drug products at the package level.
          (2) Condition.--As a condition of the award of a contract 
        under paragraph (1), the private independent consulting firm 
        awarded such contract shall agree to consult with dispensers 
        that have 25 or fewer full-time employees when conducting the 
        study under such subparagraph.
          (3) Study content.--The study conducted under paragraph (1) 
        shall assess whether, with respect to conducting interoperable, 
        electronic tracing of prescription drug products at the package 
        level, the necessary hardware and software--
                  (A) is readily accessible to such dispensers;
                  (B) is not prohibitively expensive to obtain, 
                install, and maintain for such dispensers; and
                  (C) can be integrated into business practices, such 
                as interoperability with wholesale distributors, for 
                such dispensers.
          (4) Publication.--The Secretary shall publish--
                  (A) the statement of work for the study conducted 
                under paragraph (1) for public comment not later than 
                30 days before commencing the study; and
                  (B) the final version of such study for public 
                comment not later than 30 days after such study is 
                completed.
          (5) Report to congress.--Not later than 30 days after the 
        date on which the study conducted under paragraph (1) is 
        completed, the Secretary shall submit to the Committee on 
        Energy and Commerce of the House of Representatives and the 
        Committee on Health, Education, Labor, and Pensions of the 
        Senate, a report on the findings of the study and any 
        recommendations to improve the technology and software 
        available to small dispensers for purposes of conducting 
        electronic, interoperable tracing of prescription drug products 
        at the package level.
          (6) Public meeting.--Not later than 180 days after the date 
        on which the study conducted under paragraph (1) is completed, 
        the Secretary shall hold a public meeting at which members of 
        the public, including stakeholders, may present their views on 
        the study.
  (e) Reports.--
          (1) GAO report.--Not later than 12 years after the date of 
        the enactment of this Act, the Comptroller General shall submit 
        to the Committee on Energy and Commerce of the House of 
        Representatives and the Committee on Health, Education, Labor, 
        and Pensions of the Senate a report on the results of the study 
        conducted under subsection (c).
          (2) FDA report.--Not later than 12 years after the date of 
        the enactment of this Act, the Secretary shall submit to the 
        Committee on Energy and Commerce of the House of 
        Representatives and the Committee on Health, Education, Labor, 
        and Pensions of the Senate a report on the results of the pilot 
        program conducted under subsection (a), taking into 
        consideration--
                  (A) the comments received during the public meetings 
                conducted under subsection (b); and
                  (B) the results of the study conducted, and the 
                public comments received during the public meeting 
                held, under subsection (d).
  (f) Establishment of Additional Requirements.--
          (1) In general.--Notwithstanding any other provision of this 
        Act, including the amendments made by this Act, not earlier 
        than January 1, 2027, and not later than March 1, 2027, the 
        Secretary shall issue proposed regulations that establish 
        additional requirements to prevent a suspect product, 
        illegitimate product, or a product that is counterfeit, stolen, 
        diverted, or otherwise unfit for distribution from entering 
        into or being further distributed in the supply chain, 
        including--
                  (A) requirements related to the use of interoperable 
                electronic systems and technologies for enhanced 
                tracing of prescription drug product at the package 
                level, which may include verification of the 
                prescription drug product identifier of a package of 
                prescription drug product and enhanced verification of 
                saleable returns;
                  (B) requirements related to the use of additional 
                prescription drug product identifiers or prescription 
                drug product identifier technology that meet the 
                standards developed under section 582(a)(2) of the 
                Federal Food, Drug, and Cosmetic Act, as added by 
                section 2;
                  (C) requirements related to the use of aggregation, 
                inference, and other methods, if determined to be 
                necessary components of the systems and technologies 
                referred to in subparagraph (A); and
                  (D) other data transmission and maintenance 
                requirements and interoperability standards.
          (2) Flexibility.--The requirements described in paragraph (1) 
        shall provide for flexibility for a member of the 
        pharmaceutical supply chain, by--
                  (A) with respect to dispensers, allowing a dispenser 
                to enter into a written agreement with a third party, 
                including an authorized wholesale distributor, under 
                which--
                          (i) the third party confidentially maintains 
                        any information required to be maintained under 
                        such requirements for the dispenser; and
                          (ii) the dispenser maintains a copy of the 
                        written agreement and is not relieved of the 
                        other obligations of the dispenser under such 
                        requirements;
                  (B) establishing a process by which an authorized 
                manufacturer, repackager, wholesale distributor, or 
                dispenser may request a waiver from any such 
                requirements if the Secretary determines that such 
                requirements would result in an undue economic hardship 
                on the manufacturer, wholesale distributor, or 
                dispenser;
                  (C) not requiring the adoption of specific business 
                systems by a member of the pharmaceutical supply chain 
                for the maintenance and transmission of prescription 
                drug product tracing data; and
                  (D) prescribing alternative methods of compliance for 
                small businesses, as specified in paragraph (4).
          (3) Considerations.--In issuing proposed regulations under 
        paragraph (1), the Secretary shall consider--
                  (A) the results of the pilot project conducted under 
                subsection (a);
                  (B) the public meetings held under subsection (b);
                  (C) the studies conducted under subsections (c) and 
                (d);
                  (D) the reports submitted under subsection (e);
                  (E) the public health benefits of such regulations 
                compared with the cost of compliance with the 
                requirements contained in such regulations, including 
                with respect to entities of varying sizes and 
                capabilities; and
                  (F) the diversity of the pharmaceutical distribution 
                supply chain by providing appropriate flexibility for 
                each sector in the supply chain, including small 
                businesses.
          (4) Small business protection.--The Secretary, taking into 
        consideration the study conducted under paragraph (d), shall, 
        if the Secretary determines that the requirements established 
        pursuant to paragraph (1) would result in an undue economic 
        hardship on small businesses, provide for alternative methods 
        of compliance with any such requirement by small businesses, 
        including--
                  (A) establishing timelines for such compliance 
                (including compliance by dispensers with 25 or fewer 
                full-time employees) that do not impose undue economic 
                hardship for small businesses, including dispensers 
                with respect to which the study concluded has 
                insufficient hardware and software to conduct 
                interoperable, electronic tracing of prescription drug 
                products at the package level; and
                  (B) establishing a process by which a dispenser may 
                request a waiver from any such requirement.
          (5) Regulations.--In issuing regulations to carry out this 
        subsection, the Secretary shall--
                  (A) issue a notice of proposed rulemaking that 
                includes a copy of the proposed rule;
                  (B) provide for a period of not less than 60 days for 
                comments on the proposed rule; and
                  (C) provide for an effective date of the final rule 
                that is 2 years after the date on which such final rule 
                is published.
          (6) Sunset.--The requirements regarding the provision and 
        receipt of transaction history and transaction statements under 
        section 582 of the Federal Food, Drug, and Cosmetic Act, as 
        added by section 2, shall cease to be effective on the date on 
        which the regulations issued under this section are fully 
        implemented.
  (g) Definitions.--In this section:
          (1) The terms defined in section 581 of the Federal Food, 
        Drug, and Cosmetic Act, as added by section 2, shall have the 
        same meanings in this section as such terms are given in such 
        section 581.
          (2) The term ``Secretary'' means the Secretary of Health and 
        Human Services, acting through the Commissioner of Food and 
        Drugs.

SEC. 4. NATIONAL STANDARDS FOR WHOLESALE DISTRIBUTORS.

  (a) Standards.--Chapter V of the Federal Food, Drug, and Cosmetic Act 
(21 U.S.C. 351 et seq.) is amended--
          (1) in section 503 (21 U.S.C. 353), by striking ``(e)(1)(A)'' 
        and all that follows through ``(3) For the purposes of this 
        subsection and subsection (d)--'' and inserting the following:
  ``(e) For purposes of subsection (d)--'';
          (2) in section 503(e) (21 U.S.C. 353(e)), by redesignating 
        subparagraphs (A) and (B) as paragraphs (1) and (2), 
        respectively; and
          (3) in subchapter H, as added by section 2, by adding at the 
        end the following:

``SEC. 583. NATIONAL STANDARDS FOR WHOLESALE DISTRIBUTORS.

  ``(a) Standards.--
          ``(1) In general.--The Secretary shall establish, by 
        regulation, standards for the licensing of persons that make 
        wholesale distributions.
          ``(2) Requirements.--The standards under paragraph (1) shall, 
        with respect to wholesale distributions, include requirements 
        for--
                  ``(A) the storage and handling of drugs subject to 
                section 503(b)(1), including facility requirements;
                  ``(B) the establishment and maintenance of records of 
                the distributions of such drugs;
                  ``(C) the furnishing of a bond or other equivalent 
                means of security in accordance with paragraph (3);
                  ``(D) mandatory background checks and fingerprinting 
                of facility managers or designated representatives;
                  ``(E) the establishment and implementation of 
                qualifications for key personnel;
                  ``(F) the mandatory physical inspection of any 
                facility to be used in wholesale distribution within a 
                reasonable timeframe from the initial application for 
                licensure of the wholesale distributor; and
                  ``(G) in accordance with paragraph (5), the 
                prohibition of certain persons from engaging in 
                wholesale distribution.
          ``(3) Bond or other security.--The requirements under 
        paragraph (2)(C) shall provide for the following:
                  ``(A) An applicant that is not a government-owned-
                and-operated wholesale distributor, for the issuance or 
                renewal of a wholesale distributor license, shall 
                submit a surety bond of $100,000 or other equivalent 
                means of security acceptable to the applicable 
                licensing authority.
                  ``(B) For purposes of subparagraph (A), the 
                applicable licensing authority may accept a surety bond 
                less than $100,000 if the annual gross receipts of the 
                previous tax year for the wholesale distributor is 
                $10,000,000 or less, in which case the surety bond may 
                not be less than $25,000.
                  ``(C) If a wholesale distributor can provide evidence 
                that it possesses the required bond in a State, the 
                requirement for a bond in another State is waived.
          ``(4) Inspections.--To satisfy the inspection requirement 
        under paragraph (2)(F), the Secretary may conduct the 
        inspection, or may accept an inspection by--
                  ``(A) the government of the State in which the 
                facility is located; or
                  ``(B) a third-party accreditation or inspection 
                service approved by the Secretary.
          ``(5) Prohibited persons.--The requirements under paragraph 
        (2) shall include requirements to prohibit a person from 
        receiving or maintaining licensure for wholesale distribution 
        if the person--
                  ``(A) has been convicted of any felony for conduct 
                relating to wholesale distribution; any felony 
                violation of section 301(i) or 301(k); or any felony 
                violation of section 1365 of title 18, United States 
                Code, relating to prescription drug product tampering; 
                or
                  ``(B) has engaged in a pattern of violating the 
                requirements of this section that presents a threat of 
                serious adverse health consequences or death to humans.
  ``(b) Reporting by Licensed Wholesale Distributors.--
          ``(1) Annual report.--Beginning not later than 1 year after 
        the date of the enactment of this section, each person engaged 
        in wholesale distribution in interstate commerce shall submit 
        on an annual basis, and update as necessary, a report to the 
        Secretary including--
                  ``(A) the wholesale distributor's name;
                  ``(B) the wholesale distributor's address;
                  ``(C) a listing of each State in which the wholesale 
                distributor is licensed for wholesale distribution; and
                  ``(D) any disciplinary actions taken by a State, the 
                Federal Government, or a foreign government during the 
                reporting period against the wholesale distributor.
          ``(2) Posting on internet.--The Secretary shall post on the 
        public Internet Website of the Food and Drug Administration the 
        name of each wholesale distributor, and the State in which each 
        such distributor is licensed, based on reports under paragraph 
        (1).
  ``(c) Preservation of State Authority.--This subchapter does not 
prohibit a State from--
          ``(1) licensing wholesale distributors for the conduct of 
        wholesale distribution activities in the State in accordance 
        with this subchapter; and
          ``(2) collecting fees from wholesale distributors in 
        connection with such licensing,
so long as the State does not require such licensure to the extent to 
which an entity is engaged in third-party logistics provider 
activities.
  ``(d) Definition.--In this section, the term `wholesale distribution' 
means the distribution of a drug subject to section 503(b)(1) to a 
person other than a consumer or patient, but does not include--
          ``(1) intracompany distribution of any drug between members 
        of an affiliated group (as defined in section 1504(a) of the 
        Internal Revenue Code of 1986);
          ``(2) the distribution of a drug, or an offer to distribute a 
        drug among hospitals or other health care entities which are 
        under common control;
          ``(3) the distribution of a drug or an offer to distribute a 
        drug for emergency medical reasons, including a public health 
        emergency declaration pursuant to section 319 of the Public 
        Health Service Act, except that a drug shortage not caused by a 
        public health emergency shall not constitute such an emergency 
        medical reason;
          ``(4) dispensing of a drug pursuant to a valid prescription 
        executed in accordance with subsection 503(b)(1);
          ``(5) the distribution of minimal quantities of drug by a 
        licensed retail pharmacy to a licensed practitioner for office 
        use;
          ``(6) the distribution of a drug or an offer to distribute a 
        drug by a charitable organization to a nonprofit affiliate of 
        the organization to the extent otherwise permitted by law;
          ``(7) the purchase or other acquisition by a dispenser, 
        hospital, or other health care entity of a drug for use by such 
        dispenser, hospital, or other health care entity;
          ``(8) the distribution of a drug by the manufacturer of such 
        drug;
          ``(9) the receipt or transfer of a drug by an authorized 
        third-party logistics provider provided that such third-party 
        logistics provider does not take ownership of the drug;
          ``(10) the transport of a drug by a common carrier, provided 
        that the common carrier does not take ownership of the drug;
          ``(11) the distribution of a drug, or an offer to distribute 
        a drug, by an authorized repackager that has taken ownership of 
        the drug and repacked it in accordance with section 582(e);
          ``(12) saleable drug returns when conducted by a dispenser in 
        accordance with section 203.23 of title 21, Code of Federal 
        Regulations (or any successor regulation);
          ``(13) the distribution of a combination prescription drug 
        product described in section 581(20)(B)(xiii);
          ``(14) the distribution of a medical convenience kit 
        described in section 581(21)(B)(xiv);
          ``(15) the distribution of an intravenous drug that, by its 
        formulation, is intended for the replenishment of fluids and 
        electrolytes (such as sodium, chloride, and potassium) or 
        calories (such as dextrose and amino acids);
          ``(16) the distribution of an intravenous drug used to 
        maintain the equilibrium of water and minerals in the body, 
        such as dialysis solutions;
          ``(17) the distribution of a drug that is intended for 
        irrigation or reconstitution, or sterile water, whether 
        intended for such purposes or for injection;
          ``(18) the distribution of compressed medical gas (as defined 
        in section 581(21)(C));
          ``(19) facilitating the distribution of a prescription drug 
        product by providing administrative services, such as 
        processing of orders and payments, without physical handling, 
        distribution, or storage of a prescription drug product; or
          ``(20)(A) the distribution of a product by a dispenser, or a 
        wholesale distributor acting at the direction of the dispenser, 
        to a repackager registered under section 510 for the purpose of 
        repackaging the drug for use by that dispenser or another 
        health care entity that is under the dispenser's ownership or 
        control, so long as the dispenser retains ownership of the 
        prescription drug product; and
          ``(B) the saleable or nonsaleable return by such repackager 
        of such prescription drug product.
  ``(e) Effective Date.--The standards required by subsection (a) shall 
take effect not later than 2 years after the date of the enactment of 
this section. The Secretary shall issue the regulations required by 
subsection (a) not later than 1 year after the date of the enactment of 
this Act.''.
  (b) Conforming Amendment.--Section 804(a)(5)(A) of the Federal Food, 
Drug, and Cosmetic Act (21 U.S.C. 384(a)(5)(A)) is amended by striking 
``503(e)(2)(A)'' and inserting ``583(a)''.

SEC. 5. NATIONAL LICENSURE STANDARDS FOR THIRD-PARTY LOGISTICS 
                    PROVIDERS.

  Subchapter H of chapter V of the Federal Food, Drug, and Cosmetic 
Act, as amended by section 4, is further amended by adding at the end 
the following:

``SEC. 584. NATIONAL LICENSURE STANDARDS FOR THIRD-PARTY LOGISTICS 
                    PROVIDERS.

  ``(a) License Requirement.--No facility may engage in the activities 
of a third-party logistics provider in any State unless--
          ``(1) the facility is licensed--
                  ``(A) by the State from which the drug is distributed 
                by the third-party logistics provider in accordance 
                with a qualified licensing program, if the State has 
                such a program; or
                  ``(B) by the Secretary under this section, if the 
                State from which the drug is distributed does not have 
                such a program; and
          ``(2) if the drug is distributed interstate and the facility 
        is not licensed by the Secretary under paragraph (1)(B), 
        registers with the State into which the drug is distributed if 
        such State requires such registration.
  ``(b) Reporting by Licensed Third-Party Logistics Providers.--
          ``(1) Annual report.--Beginning not later than 1 year after 
        the date of the enactment of this section, each facility 
        engaged in the activities of a third-party logistics provider 
        shall submit on an annual basis, and update as necessary, a 
        report to the Secretary including--
                  ``(A) the facility's name;
                  ``(B) the facility's address;
                  ``(C) a listing of each jurisdiction (whether State 
                or Federal) in which the facility is licensed for 
                third-party logistics provider activities; and
                  ``(D) any disciplinary actions taken by a State or 
                Federal licensing authority during the reporting period 
                against the facility.
          ``(2) Posting on internet.--The Secretary shall post on the 
        public Internet Website of the Food and Drug Administration the 
        name of each third-party logistics provider, and each 
        jurisdiction (whether State or Federal) in which the provider 
        is licensed, based on reports under paragraph (1).
  ``(c) Preservation of State Authority.--This subchapter does not 
prohibit a State from--
          ``(1) licensing third-party logistic providers for the 
        conduct of third-party logistics provider activities in the 
        State in accordance with this subchapter; and
          ``(2) collecting fees from third-party logistics providers in 
        connection with such licensing,
so long as the State does not require such licensure to the extent to 
which an entity is engaged in wholesale distribution.
  ``(d) Costs.--
          ``(1) Authorized licensure fees.--In the case of a facility 
        engaging in the activities of a third-party logistics provider 
        licensed by the Secretary under this section, the Secretary may 
        assess and collect a reasonable fee in an amount equal to the 
        costs to the Federal Government of establishing and 
        administering the licensure program established, and conducting 
        period inspections, under this section.
          ``(2) Adjustment.--The Secretary shall adjust the amount of 
        the fee under paragraph (1) on an annual basis, if necessary, 
        to generate an amount of revenue equal to the costs referred to 
        in such paragraph.
          ``(3) Availability.--Fees assessed and collected under this 
        subsection shall be available for obligation only to the extent 
        and in the amount provided in advance in appropriations Acts. 
        Such fees shall remain available until expended.
  ``(e) License Regulations.--
          ``(1) In general.--The Secretary shall establish, by 
        regulation, standards, terms, and conditions for licensing 
        persons to engage in third-party logistics provider activities.
          ``(2) Content.--The regulations under paragraph (1) shall--
                  ``(A) include standards relating to eligibility for, 
                and revocation and reissuance of, licenses;
                  ``(B) establish a process by which the applicable 
                licensing authority will, upon request by a third-party 
                logistics provider that is accredited by a third-party 
                accreditation program approved by the Secretary, issue 
                a license to the provider;
                  ``(C) establish a process by which the Secretary 
                shall issue a license to a third-party logistics 
                provider if the Secretary is not able to approve a 
                third-party accreditation program because no such 
                program meets the Secretary's requirements necessary 
                for approval of such a third-party accreditation 
                program;
                  ``(D) require that the third-party logistics provider 
                comply with storage practices, as determined by the 
                Secretary, at the provider's facilities, including--
                          ``(i) maintaining access to warehouse space 
                        of suitable size to facilitate safe operations, 
                        including a suitable area to quarantine suspect 
                        prescription drug product;
                          ``(ii) maintaining adequate security; and
                          ``(iii) having written policies and 
                        procedures to--
                                  ``(I) address receipt, security, 
                                storage, inventory, shipment, and 
                                distribution of a prescription drug 
                                product;
                                  ``(II) identify, record, and report 
                                confirmed losses or thefts in the 
                                United States;
                                  ``(III) correct errors and 
                                inaccuracies in inventories;
                                  ``(IV) provide support for 
                                manufacturer recalls;
                                  ``(V) prepare for, protect against, 
                                and address any reasonably foreseeable 
                                crisis that affects security or 
                                operation at the facility, such as a 
                                strike, fire, or flood;
                                  ``(VI) ensure that any expired 
                                prescription drug product is segregated 
                                from other prescription drug products 
                                and returned to the manufacturer or 
                                repackager or destroyed;
                                  ``(VII) maintain the capability to 
                                electronically trace the receipt and 
                                outbound distribution of a prescription 
                                drug product, and supplies and records 
                                of inventory; and
                                  ``(VIII) quarantine or destroy a 
                                suspect prescription drug product if 
                                directed to do so by the respective 
                                manufacturer, wholesale distributor, 
                                dispenser, or an authorized government 
                                agency;
                  ``(E) provide for periodic inspection, as determined 
                by the Secretary, of such facility warehouse space to 
                ensure compliance with this section;
                  ``(F) prohibit a facility from having as a manager or 
                designated representative anyone convicted of any 
                felony violation of section 301(i) or 301(k) or any 
                felony violation of section 1365 of title 18, United 
                States Code, relating to prescription drug product 
                tampering;
                  ``(G) perform mandatory background checks of the 
                provider's facility managers or designated 
                representatives of such managers;
                  ``(H) require a third-party logistics provider to 
                provide to the applicable licensing authority, upon the 
                authority's request, a list of all prescription drug 
                product manufacturers, wholesale distributors, and 
                dispensers for whom the third-party logistics provider 
                provides services at the provider's facilities; and
                  ``(I) include procedures under which any third-party 
                logistics provider license--
                          ``(i) will expire on the date that is 3 years 
                        after issuance of the license; and
                          ``(ii) may be renewed for additional 3-year 
                        periods.
  ``(f) Validity of License.--A license issued under this section shall 
remain valid as long as such third-party logistics provider remains 
accredited by the Secretary, subject to renewal under subsection (d). 
If the Secretary finds that the third-party accreditation program 
demonstrates that all applicable requirements for licensure under this 
section are met, the Secretary shall issue a license under this section 
to a third-party logistics provider receiving accreditation.
  ``(g) Qualified Licensing Program Defined.--In this section, the term 
`qualified licensing program' means a program meeting the requirements 
of this section and the regulations thereunder.
  ``(h) Effective Date.--The requirements of this section shall take 
effect not later than 1 year after the date of the enactment of this 
section. The Secretary shall issue the regulations required by 
subsection (d) not later than 180 days after the date of the enactment 
of this section.''.

SEC. 6. PENALTIES.

  (a) Prohibited Acts.--Section 301(t) of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 331(t)) is amended by striking ``or the 
distribution of drugs in violation of section 503(e) or the failure to 
otherwise comply with the requirements of section 503(e)'' and 
inserting ``the failure to comply with any requirement of section 582, 
engaging in the wholesale distribution of a drug in violation of 
section 583 or the failure to otherwise comply with the requirements of 
section 583, or engaging in the activities of a third-party logistics 
provider in violation of section 584 or the failure to otherwise comply 
with the requirements of section 584''.
  (b) Enhanced Penalty for Knowing Unlicensed Activities.--Section 
303(b)(1)(D) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
333(b)(1)(D)) is amended by striking ``503(e)(2)(A)'' and inserting 
``583 or 584''.
  (c) Misbranding.--Section 502 of the Federal Food, Drug, and Cosmetic 
Act (21 U.S.C. 352) is amended by adding at the end the following:
  ``(bb) If it is a drug and it fails to bear a prescription drug 
product identifier as required by section 582.''.

SEC. 7. UNIFORM NATIONAL POLICY.

  Subchapter H of chapter V of the Federal Food, Drug, and Cosmetic 
Act, as amended by section 5, is further amended by adding at the end 
the following:

``SEC. 585. UNIFORM NATIONAL POLICY.

  ``(a) Preemption of State Prescription Drug Product Tracing and Other 
Requirements.--Beginning on the date of the enactment of the 
Safeguarding America's Pharmaceuticals Act of 2013, no State or 
political subdivision of a State may establish or continue in effect 
any requirements for tracing drugs through the distribution system 
(including any requirements with respect to paper or electronic 
pedigrees, track and trace, statements of distribution history, 
transaction history, or transaction statements, or verification, 
investigation, disposition, alerts, or recordkeeping relating to the 
pharmaceutical distribution supply chain system) that--
          ``(1) are inconsistent with, more stringent than, or in 
        addition to any requirements applicable under this Act; or
          ``(2) are inconsistent with any applicable waiver, exception, 
        or exemption issued by the Secretary under section 582(a).
  ``(b) Standards or Licensure.--
          ``(1) In general.--Beginning on the date of the enactment of 
        Safeguarding America's Pharmaceuticals Act of 2013, no State or 
        political subdivision of a State may establish or continue any 
        standards, requirements, or regulations with respect to 
        wholesale drug distributor or third-party logistics provider 
        licensure which are inconsistent with, less stringent than, in 
        addition to, or more stringent than, the standards and 
        requirements under this Act.
          ``(2) Licensing fees.--Paragraph (1) does not affect the 
        authority of a State to collect fees from wholesale drug 
        distributors or third-party logistics providers in connection 
        with State licensing under section 583 or 584 pursuant to a 
        licensing program meeting the requirements of such sections.
          ``(3) Enforcement, suspension, and revocation of licenses.--
        Notwithstanding paragraph (1), a State--
                  ``(A) may take administrative action, including 
                fines, to enforce a licensure requirement promulgated 
                by the State in accordance with this Act;
                  ``(B) may provide for the suspension or revocation of 
                licenses issued by the State for violations of the laws 
                of such State;
                  ``(C) upon conviction of a person for a violation of 
                Federal, State, or local controlled substance laws or 
                regulations, may provide for fines, imprisonment, or 
                civil penalties; and
                  ``(D) may regulate activities of entities licensed 
                pursuant to section 583 or 584 in a manner that is 
                consistent with the provisions of this subchapter.''.

SEC. 8 ELECTRONIC LABELING.

  (a) In General.--Section 502(f) of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 352(f)) is amended by adding at the end the 
following new sentence: ``Required labeling (other than immediate 
container or carton labels) that is intended for use by a physician, a 
pharmacist, or another health care professional, and that provides 
directions for human use of a drug subject to section 503(b)(1), may 
(except as necessary to mitigate a safety risk, as specified by the 
Secretary in regulation) be made available by electronic means instead 
of paper form, provided that such labeling complies with all applicable 
requirements of law, the manufacturer or distributor, as applicable, 
affords health care professionals and authorized dispensers (as defined 
in section 581) the opportunity to request the labeling in paper form, 
and after such a request the manufacturer or distributor promptly 
provides the requested information without additional cost.''.
  (b) Regulations.--The Secretary of Health and Human Services shall 
promulgate regulations implementing the amendment made by subsection 
(a).
  (c) Application.--The last sentence of section 502(f) of the Federal 
Food, Drug, and Cosmetic Act (21 U.S.C. 352(f)), as added by subsection 
(a), shall apply beginning on the earlier of--
          (1) the effective date of final regulations promulgated under 
        subsection (b); or
          (2) the day that is 180 days after the date of enactment of 
        this Act.

                          Purpose and Summary

    H.R. 1919, the ``Safeguarding America's Pharmaceuticals Act 
of 2013,'' was introduced on May 9, 2013, by Reps. Bob Latta 
(OH-05) and Jim Matheson (UT-04) and referred to the Committee 
on Energy and Commerce.
    This legislation would amend the Federal Food, Drug, and 
Cosmetic Act, with respect to the pharmaceutical distribution 
supply chain.

                  Background and Need for Legislation

    H.R. 1919 would strengthen the security of the United 
States' prescription drug supply chain in order to protect 
Americans against counterfeit drugs. Further, H.R. 1919 would 
help prevent increases in drug prices, help avoid additional 
drug shortages, and eliminate hundreds of millions of dollars 
worth of duplicative government regulation by replacing the 
patchwork of State requirements imposed on American drug 
manufacturers, wholesale distributors, and pharmacies with a 
uniform national standard.\1\
---------------------------------------------------------------------------
    \1\Grace-Marie Turner. ``Secure The Pharmaceutical Supply Chain 
From Risky Counterfeiters'' Forbes, 20 May 2013, http://www.forbes.com/
sites/gracemarieturner/2013/05/20/secure-the-pharmaceutical-supply-
chain-from-risky-counterfeiters/ (accessed May 28, 2013).
---------------------------------------------------------------------------
    The American prescription drug supply chain is increasingly 
vulnerable to counterfeit drugs. This vulnerability exists, in 
large part, due to a patchwork of inconsistent State 
regulations. According to recent reports, the number of 
counterfeit prescription drugs is growing across the country. 
Experts have commented that the counterfeiting of prescription 
drugs has grown even more lucrative than trafficking illegal 
drugs, such as heroin or cocaine.\2\ These counterfeit 
prescription drugs have reached our nation's sickest patients, 
including those with cancer. Cancer drugs are highly targeted 
due to their high cost.\3\
---------------------------------------------------------------------------
    \2\Weaver, Christopher. ``More Lucrative Than Cocaine: Fake 
Medicine On The Rise,'' Wall Street Journal, 13 Feb 2013, http://
blogs.wsj.com/corporate-intelligence/2013/02/13/more-
lucrative-than-cocaine-fake-medicine-on-the-rise/ (accessed 28 May 
2013).
    \3\Whalen, Jeanne; Faucon, Benoit. ``Counterfeit Cancer Medicines 
Multiply,'' Wall Street Journal, 31 Dec. 2013. http://online.wsj.com/
article/SB1000142412788732332040 4578211492452353034.html (accessed 28 
May, 2013).
---------------------------------------------------------------------------
    Some States, including California, have taken steps or 
implemented regulations for their States in an attempt to 
secure the supply chain. While well-intentioned, these State 
solutions will not increase the security of the U.S. 
prescription drug supply. For example, California's e-pedigree 
law will burden businesses in the drug supply chain by 
requiring them to implement costly and infeasible electronic 
systems for tracking and tracing prescription drugs at the 
unit-level in an unreasonable timeframe.
    According to the Pharmaceutical Distribution Security 
Alliance (a consortium of supply chain actors), California's 
law could impose up to $3.5 billion in costs on manufacturers. 
Smaller distributors would be forced to potentially ``restrict 
operations'' and ``some may be forced out of business.'' A 
study from Accenture, commissioned by the National Association 
of Chain Drug Stores and National Community Pharmacists 
Association, found that startup costs from the California law 
would impose $84,000 to $112,000 per store, with additional 
costs to maintain and operate the system in subsequent years.
    Small businesses will be hardest hit. By some estimates, 
California compliance costs could swallow two-thirds of the net 
annual profit of pharmacies. The Pharmaceutical Distribution 
Security Alliance reports that after expenses, the new 
regulations will wipe out more than 100 percent of income for 
smaller distributors.\4\
---------------------------------------------------------------------------
    \4\Grace-Marie Turner. ``Secure The Pharmaceutical Supply Chain 
From Risky Counterfeiters'' Forbes, 20 May 2013, http://www.forbes.com/
sites/gracemarieturner/2013/05/20/secure-the-pharmaceutical-supply-
chain-from-risky-counterfeiters/ (accessed May 28, 2013).
---------------------------------------------------------------------------
    If the California law takes effect, these costs would have 
dramatically negative impacts on patients. For example, the 
price of prescription drugs would increase. The burden of the 
California law would also potentially worsen drug shortages for 
American patients. Additionally, the California law also would 
impose massive costs on businesses across the nation because 
the prescription drug industry is a nationwide market.
    H.R. 1919 would secure the United States supply chain in a 
reasonable, common sense way. This system would save our 
nation's businesses millions of dollars and negate other 
negative consequences of the onerous, infeasible California e-
pedigree law from spreading across the country. Additionally, 
H.R. 1919 would ensure the Food and Drug Administration (FDA) 
and industry work together in a transparent and collaborative 
process to develop a unit-level tracing system. H.R. 1919, is a 
pragmatic and effective solution to secure the United States 
supply chain, which will ensure patients receive safe and 
effective FDA approved drugs.

                                Hearings

    The Subcommittee on Health held a hearing on legislation to 
secure the American prescription drug supply chain on April 25, 
2013. The Subcommittee received testimony from: Dr. Janet 
Woodcock, Director, Center for Drug Evaluation and Research, 
Food and Drug Administration; Elizabeth A. Gallenagh, Vice 
President, Government Affairs and General Counsel, Healthcare 
Distribution Management Association; Christine M. Simmon, 
Senior Vice President, Policy and Strategic Alliances, Generic 
Pharmaceutical Association; Michael Rose, Vice President, 
Supply Chain Visability, Johnson and Johnson Health Care 
Systems, Inc.; Tim Davis, Owner, Beaver Health Mart Pharmacy, 
on behalf of the National Community Pharmacist Association; 
Allan Coukell, Director, Medical Programs, Pew Health Group, 
the Pew Cheritable Trusts; Carmet A. Catizone, Executive 
Director and Secretary, National Association of Boards of 
Pharamcy; and Walter Berghahn, President, SmartRmeds for Life, 
Executive Director, Healthcare Compliance Packaging Council.

                        Committee Consideration

    On May 8, 2013, the Subcommittee on Health met in open 
markup session and approved H.R. 1919 for full Committee 
consideration, as amended, by a voice vote. On May 15, 2013, 
the full Committee met in open markup session and approved H.R. 
1919, as amended, by voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Mr. Upton to order H.R. 1919 reported to the House, 
with amendment, was agreed to by a voice vote. The following 
reflects the recorded votes taken during the Committee 
consideration:


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee made findings that are 
reflected in this report.

         Statement of General Performance Goals and Objectives

    H.R. 1919 will secure the United States supply chain by 
creating a national standard for tracking all prescription drug 
products and establishing a process to move to a unit level 
system.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
1919, Safeguarding America's Pharmaceuticals Act of 2013, would 
result in no new or increased budget authority, entitlement 
authority, or tax expenditures or revenues.

      Earmarks, Limited Tax Benefits, and Limited Tariff Benefits

    In compliance with clause 9(e), 9(f), and 9(g) of rule XXI 
of the Rules of the House of Representatives, the Committee 
finds that H.R. 1919, Safeguarding America's Pharmaceuticals 
Act of 2013, contains no earmarks, limited tax benefits, or 
limited tariff benefits.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:
                                                      May 31, 2013.
Hon. Fred Upton,
Chairman, Committee on Energy and Commerce,
U.S. House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1919, the 
Safeguarding America's Pharmaceuticals Act of 2013.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Ellen Werble.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                          Director.
    Enclosure.

H.R. 1919--Safeguarding America's Pharmaceuticals Act of 2013

    Summary: H.R. 1919 would require the Food and Drug 
Administration (FDA) to establish national standards for 
monitoring the movement of prescription drugs through the drug 
distribution system. The ``drug distribution system'' 
encompasses the network of companies that produce, handle, 
distribute, and dispense drug products. The legislation would 
impose new regulatory requirements on such companies relating 
to the handling of drug products and recordkeeping of 
transactions, and would create notification rules concerning 
drugs that are potentially unsuitable for distribution.
    The bill also would require the FDA to establish a 
licensing program for certain third parties that provide 
logistic services to support pharmaceutical manufacturers, 
wholesalers, and dispensers. The bill would authorize FDA to 
collect and spend fees to cover the costs of the licensing 
program.
    CBO estimates that enacting H.R. 1919 would increase 
federal revenues by $19 million over the 2015-2018 period and 
by $24 million over the 2015-2023 period. Pay-as-you-go 
procedures apply because enacting the legislation would affect 
revenues.
    CBO estimates that implementing H.R. 1919 would have a 
discretionary cost of $39 million over the 2014-2018 period, 
assuming annual appropriation actions consistent with the bill.
    H.R. 1919 would impose both intergovernmental and private-
sector mandates as defined in the Unfunded Mandates Reform Act 
(UMRA) by requiring public and private-sector entities to 
comply with standards for monitoring the movement of 
prescription drugs through the distribution system. Because few 
public entities manufacture, distribute, or dispense 
prescription drugs, CBO estimates that the costs to public 
entities to comply with the mandates in the bill would be small 
and below the intergovernmental threshold established in UMRA 
($75 million in 2013, adjusted annually for inflation). CBO 
estimates that the costs to private entities would exceed the 
threshold established in UMRA ($150 million in 2013, adjusted 
annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 1919 is shown in the following table. 
The costs of this legislation fall within budget function 550 
(health).


----------------------------------------------------------------------------------------------------------------
                                                                      By fiscal year, in millions of dollars--
                                                                   ---------------------------------------------
                                                                     2014   2015   2016   2017   2018  2014-2018
----------------------------------------------------------------------------------------------------------------
                                              CHANGES IN REVENUESa

Collection of Licensing Fees
    Estimated Revenuesb...........................................      0      6      6      6      1        19
Penalties
    Estimated Revenues............................................      0      *      *      *      *         *
    Total Changes in Revenues
        Estimated Revenues........................................      0      6      6      6      1        19

                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Spending of Licensing Fees
    Estimated Authorization Level.................................      0      7      7      8      1        23
    Estimated Outlays.............................................      0      6      7      8      2        23
Activities not Related to Fees
    Estimated Authorization Level.................................      3      5      5      2      2        17
    Estimated Outlays.............................................      2      4      5      3      2        16
Total Changes in Discretionary Spending
        Estimated Authorization Level.............................      3     12     12     10      3        40
        Estimated Outlays.........................................      2     10     12     11      4       39
----------------------------------------------------------------------------------------------------------------
Note: * = less than $500,000.
aCBO estimates that enacting the bill would increase revenues by $24 million over the 2015-2023 period.
bCBO estimates that the assessments in H.R. 1919 would reduce income and payroll taxes because assessments on
  firms are indirect business charges that reduce the tax base of income and payroll taxes. Numbers here reflect
  net receipts to the Treasury.

    Basis of estimate: For the estimate, CBO assumes that the 
legislation will be enacted by the end of fiscal year 2013, and 
that the Congress will take appropriation actions consistent 
with the bill for the funding of FDA activities. We also assume 
that outlays will follow historical patterns for similar 
activities.
    H.R. 1919 would authorize FDA to expand its oversight of 
the drug distribution system in the United States. The 
legislation aims to improve the safety of the U.S. drug supply 
by requiring enhanced monitoring of the chain of transactions 
from the manufacturer of a drug to the party that ultimately 
dispenses the drug to the consumer.
    Key provisions of H.R. 1919 include new requirements on 
entities in the drug distribution system relating to:
           Storage and handling of prescription drug 
        products,
           Maintenance of records,
           Mandatory inspections of wholesaler 
        facilities,
           Mandatory use of uniform identification 
        numbers (UIDs) on packages or cases,\1\ and
---------------------------------------------------------------------------
    \1\After 2027, the bill would require that identifiers be applied 
to individual units of drug products.
---------------------------------------------------------------------------
           Identification and notification rules 
        concerning products that are potentially counterfeit, 
        diverted, stolen or otherwise appear unfit for 
        distribution.
    Revenues: CBO estimates that enacting H.R. 1919 would 
increase federal revenues by $19 million over the 2015-2018 
period and by $24 million over the 2015-2023 period. The 
legislation would affect revenues in two ways:
           Authorizing the FDA to assess fees on 
        certain third parties to cover the costs of licensing 
        and conducting periodic inspections would increase 
        governmental receipts; and
           Collecting fines associated with violations 
        of certain new requirements imposed by the bill that 
        would be recorded as federal revenues.
    Collection of Licensing Fees. H.R. 1919 would require the 
FDA to license and oversee certain third parties that provide 
logistic services for a pharmaceutical manufacturer, 
wholesaler, or distributor. For example, services provided by 
such entities include warehousing and transporting drug 
products without taking ownership or responsibility for the 
sale or disposition of the products. The bill would require all 
such facilities to be licensed by a state or the FDA. The bill 
would authorize the collection and spending of fees by FDA to 
cover the costs of activities related to issuing those licenses 
such as periodic inspections.
    CBO expects FDA would begin licensing facilities in fiscal 
year 2015, thus we expect fee collections would start in that 
year. CBO expects that FDA would set fees to cover $23 million 
in estimated gross costs over the 2015-2018 period (as 
described below under ``Spending Subject to Appropriation''). 
However, because those fees are expected to reduce the tax base 
for income and payroll taxes, CBO estimates revenues from those 
sources would be reduced. Overall, CBO estimates net receipts 
to the Treasury would increase by $19 million over the 2015-
2018 period.
    Penalties. Civil monetary penalties could be assessed on 
the facilities in the drug distribution system for violations 
of new requirements under H.R. 1919. Based on enforcement 
actions of violations, CBO expects that any additional revenues 
from the imposition of penalties would not be significant 
because of the small number of additional cases likely to be 
affected.
    Spending subject to appropriation: Assuming appropriation 
actions consistent with the bill, CBO estimates that 
implementing H.R. 1919 would have a discretionary cost of $39 
million over the 2014-2018 period.
    Spending of Licensing Fees. H.R. 1919 would authorize FDA 
to collect fees to help defray the costs of establishing a 
licensure program for third parties that provide logistic 
services. The spending of fees would be subject to future 
appropriation action. (CBO expects that the collections from 
licensing fees would be classified as revenues, as discussed 
above in the ``Revenues'' section.)
    Based on information on costs of similar oversight 
programs, CBO estimates the costs to the FDA of implementing 
those provisions of H.R. 1919 would be $23 million over the 
2015-2018 period. CBO expects higher start-up costs through 
2017 to fund information technology systems and other 
activities necessary to implement the program.
    Activities Not Related to Fees. H.R. 1919 would require FDA 
to establish a number of standards to enhance the safety and 
security of prescription drugs as those drugs are distributed 
from the manufacturer to the pharmacy, hospital, or other 
persons authorized to dispense or administer prescription drugs 
to consumers. In developing those standards the FDA would be 
required to host numerous public meetings, implement at least 
one pilot project, and promulgate regulations. CBO estimates 
the costs to FDA of implementing those provisions would be 
about $16 million over the 2014-2018 period, subject to 
appropriation of the necessary amounts.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in revenues that are subject to those 
pay-as-you-go procedures are shown in the following table.

         CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 1919, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON ENERGY AND COMMERCE ON MAY 15, 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, in millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2013   2014   2015   2016   2017   2018   2019   2020   2021   2022   2023  2013-2018  2013-2023
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             NET DECREASE (-) IN THE DEFICIT

Statutory Pay-As-You-Go Impact.......................      0      0     -6     -6     -6     -1     -1     -1     -1     -1     -1      -19        -24
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: H.R. 1919 
would impose both intergovernmental and private-sector mandates 
as defined in UMRA by requiring public and private-sector 
entities to comply with standards for monitoring the movement 
of prescription drugs through the distribution system.
    Effects on the Private Sector: To monitor the movement of 
prescription drugs, the bill would impose a number of mandates, 
as defined in UMRA, on drug manufacturers, repackagers, 
wholesale distributors, dispensers (primarily pharmacies), and 
third parties that provide logistic services (TPLs). Such 
entities would be required to:
           Maintain records of the transaction history 
        of all drug products for three years,
           Only accept or transfer ownership of drug 
        products with a UID,
           Identify suspect or illegitimate drug 
        products and notify the FDA of such a discovery,
           Identify, quarantine, dispose, and maintain 
        records of illegitimate drug products, and
           Pay fees to cover the costs of licensing.
    Because existing law in California affects nearly all 
manufacturers, repackagers, wholesale distributors, and TPLs, 
CBO estimates that the cost of the mandates contained in H.R. 
1919 for those private-sector entities would be small. However, 
independent pharmacies and pharmacies based in hospitals--
currently unaffected by existing laws in California--would face 
new costs to comply with the mandates. According to data from 
the National Community Pharmacy Association, roughly 20,000 
independent pharmacies operate outside of California, most of 
which would incur new costs in complying with the requirements 
in H.R. 1919.
    The cost of compliance would vary across pharmacies and 
would depend on the type of data systems developed by 
manufacturers, wholesale distributors, TPLs, and repackagers. A 
study by Accenture in 2011 estimated that the cost of complying 
with a federal standard for tracing prescription drugs would 
cost the average independent pharmacy roughly $84,000 per 
pharmacy store in the first year.\2\ Even if the first-year 
costs to independent and hospital-based pharmacies that operate 
outside of California were half that amount, the costs to 
comply with the mandate in that year would exceed $800 million. 
Thus, CBO estimates the costs to those pharmacies of complying 
with the standards in H.R. 1919 would exceed the threshold 
established in UMRA ($150 million in 2013, adjusted annually 
for inflation) in at least one of the first five years in which 
the mandate would be in effect.
---------------------------------------------------------------------------
    \2\``Current Status of Safety of the U.S. Prescription Drug 
Distribution System,'' June 2008, Updated for NACDS March 2011, 
Accenture.
---------------------------------------------------------------------------
    Effects on state, local, and tribal governments: Because 
few pharmacies are public entities, CBO estimates that the 
intergovernmental costs of the mandates would be small and 
below the threshold established in UMRA ($75 million in 2013, 
adjusted annually for inflation). The bill also would preempt 
state laws that require tracing prescription drugs through the 
distribution system. In addition, the legislation would preempt 
state licensing laws that govern wholesale drug distributors or 
TPLs if those laws are less stringent than the standards 
established by the bill. Because they would limit the 
application of state law, those preemptions would be 
intergovernmental mandates as defined in UMRA; however, they 
would impose no duty on states that would result in additional 
spending.
    Estimate prepared by: Federal Costs: Ellen Werble, Lisa 
Ramirez-Branum, and Barbara Edwards; Impact on State, Local, 
and Tribal Governments: Lisa Ramirez-Branum; Impact on the 
Private Sector: Michael Levine.
    Estimate approved by: Holly Harvey, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                    Duplication of Federal Programs

    No provision of H.R. 1919 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee estimates that enacting H.R. 1919 
specifically directs to be completed 6 specific rule makings 
within the meaning of 5 U.S.C. 551.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1: Short Title

    Section 1 provides the short title of ``Safeguarding 
America's Pharmaceuticals Act of 2013.''

Section 2: Pharmaceutical Distribution Supply Chain

    This section would increase the security of the supply 
chain by establishing lot-level tracing requirements for 
manufacturers, wholesale distributors, pharmacies, and 
repackagers based on changes in ownership. These requirements 
would be phased in starting on January 1, 2015. Under the 
requirements, transaction statements would be passed through 
the supply chain so those taking ownership would know where the 
drug had been. It also would require the members of the supply 
chain, including third-party logistics providers, to undertake 
verification and notification activities regarding suspect or 
illegitimate products. Further, it would require that members 
of the supply chain only transact with registered or licensed 
entities. Finally, the section would require manufacturers to 
serialize prescription drugs at the unit-level starting in five 
years.

Section 3: Enhanced Drug Distribution Security

    This section would require the FDA to establish pilot 
projects and hold biannual public meetings in order to foster 
collaboration with stakeholders regarding moving to unit-level 
traceability. The section also would require that the 
Government Accountability Office (GAO) and FDA submit reports 
to Congress on those same subjects. As part of its report, FDA 
would include the findings of a study by a third-party entity 
on small dispensers' ability to conduct interoperable tracing 
at the unit-level. Finally, it would require FDA to issue a 
proposed regulation on unit-level traceabilty in 2027.

Section 4: National Standards for Wholesale Distributors

    This section would establish national standards for 
wholesale distributors, while continuing State licensing of 
wholesale distributors and State fee collection.

Section 5: National Licensure Standards for Third-Party Logistics 
        Providers

    This section would establish third-party logistics provider 
licensure standards and allow FDA to charge a user fee. It 
would not prevent a State from licensing third-party logistics 
providers in accordance with the section.

Section 6: Penalties

    This section would establish penalties for violations of 
the requirements of the bill to ensure bad actors are held 
accountable.

Section 7: Uniform National Policy

    This section would preempt, upon enactment, State laws on 
tracing drugs through the distribution system, including 
California. It also would preempt State laws regarding 
standards for wholesale drug distributors and third-party 
logistics providers. This preemption would not affect the 
authority of States to collect fees from wholesale drug 
distributors or third-party logistics providers. In addition, 
State programs related to prescription drug monitoring and 
controlled substance reporting would not be affected.

Section 8: Electronic Labeling Requirement

    This section would allow prescription drug labeling, other 
than container or container labels, to be provided by 
electronic means to physician, pharmacists, or other healthcare 
professionals. The Secretary may exclude drugs subject to 
section 503(b)(1) in order to mitigate safety risks. 
Physicians, pharmacists, and healthcare professionals may 
receive paper labeling by request at no cost to themselves.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                  FEDERAL FOOD, DRUG, AND COSMETIC ACT




           *       *       *       *       *       *       *
               CHAPTER III--PROHIBITED ACTS AND PENALTIES


                            PROHIBITED ACTS

  Sec. 301. The following acts and the causing thereof are 
hereby prohibited:
  (a) * * *

           *       *       *       *       *       *       *

  (t) The importation of a drug in violation of section 
801(d)(1), the sale, purchase, or trade of a drug or drug 
sample or the offer to sell, purchase, or trade a drug or drug 
sample in violation of section 503(c), the sale, purchase, or 
trade of a coupon, the offer to sell, purchase, or trade such a 
coupon, or the counterfeiting of such a coupon in violation of 
section 503(c)(2), the distribution of a drug sample in 
violation of section 503(d) or the failure to otherwise comply 
with the requirements of section 503(d), [or the distribution 
of drugs in violation of section 503(e) or the failure to 
otherwise comply with the requirements of section 503(e)] the 
failure to comply with any requirement of section 582, engaging 
in the wholesale distribution of a drug in violation of section 
583 or the failure to otherwise comply with the requirements of 
section 583, or engaging in the activities of a third-party 
logistics provider in violation of section 584 or the failure 
to otherwise comply with the requirements of section 584.

           *       *       *       *       *       *       *


                               PENALTIES

  Sec. 303. (a) * * *
  (b)(1) Notwithstanding subsection (a), any person who 
violates section 301(t) by--
          (A) * * *

           *       *       *       *       *       *       *

          (D) knowingly distributing drugs in violation of 
        section [503(e)(2)(A)] 583 or 584,
shall be imprisoned for not more than 10 years or fined not 
more than $250,000, or both.

           *       *       *       *       *       *       *


                      CHAPTER V--DRUGS AND DEVICES


Subchapter A--Drugs and Devices

           *       *       *       *       *       *       *



                      MISBRANDED DRUGS AND DEVICES

  Sec. 502. A drug or device shall be deemed to be misbranded--
  (a) * * *

           *       *       *       *       *       *       *

  (f) Unless its labeling bears (1) adequate directions for 
use; and (2) such adequate warnings against use in those 
pathological conditions or by children where its use may be 
dangerous to health, or against unsafe dosage or methods or 
duration of administration or application, in such manner and 
form, as are necessary for the protection of users, except that 
where any requirement of clause (1) of this paragraph, as 
applied to any drug or device, is not necessary for the 
protection of the public health, the Secretary shall promulgate 
regulations exempting such drug or device from such 
requirement. Required labeling for prescription devices 
intended for use in health care facilities or by a health care 
professional and required labeling for in vitro diagnostic 
devices intended for use by health care professionals or in 
blood establishments may be made available solely by electronic 
means, provided that the labeling complies with all applicable 
requirements of law, and that the manufacturer affords such 
users the opportunity to request the labeling in paper form, 
and after such request, promptly provides the requested 
information without additional cost. Required labeling (other 
than immediate container or carton labels) that is intended for 
use by a physician, a pharmacist, or another health care 
professional, and that provides directions for human use of a 
drug subject to section 503(b)(1), may (except as necessary to 
mitigate a safety risk, as specified by the Secretary in 
regulation) be made available by electronic means instead of 
paper form, provided that such labeling complies with all 
applicable requirements of law, the manufacturer or 
distributor, as applicable, affords health care professionals 
and authorized dispensers (as defined in section 581) the 
opportunity to request the labeling in paper form, and after 
such a request the manufacturer or distributor promptly 
provides the requested information without additional cost.

           *       *       *       *       *       *       *

  (bb) If it is a drug and it fails to bear a prescription drug 
product identifier as required by section 582.

EXEMPTIONS AND CONSIDERATION FOR CERTAIN DRUGS, DEVICES, AND BIOLOGICAL 
                                PRODUCTS

  Sec. 503. (a) * * *

           *       *       *       *       *       *       *

  [(e)(1)(A) Each person who is engaged in the wholesale 
distribution of a drug subject to subsection (b) and who is not 
the manufacturer or an authorized distributor of record of such 
drug shall, before each wholesale distribution of such drug 
(including each distribution to an authorized distributor of 
record or to a retail pharmacy), provide to the person who 
receives the drug a statement (in such form and containing such 
information as the Secretary may require) identifying each 
prior sale, purchase, or trade of such drug (including the date 
of the transaction and the names and addresses of all parties 
to the transaction).
  [(B) Each manufacturer of a drug subject to subsection (b) 
shall maintain at its corporate offices a current list of the 
authorized distributors of record of such drug.
  [(2)(A) No person may engage in the wholesale distribution in 
interstate commerce of drugs subject to subsection (b) in a 
State unless such person is licensed by the State in accordance 
with the guidelines issued under subparagraph (B).
  [(B) The Secretary shall by regulation issue guidelines 
establishing minimum standards, terms, and conditions for the 
licensing of persons to make wholesale distributions in 
interstate commerce of drugs subject to subsection (b). Such 
guidelines shall prescribe requirements for the storage and 
handling of such drugs and for the establishment and 
maintenance of records of the distributions of such drugs.
  [(3) For the purposes of this subsection and subsection (d)--
] (e) For purposes of subsection (d)--
          [(A)] (1) the term ``authorized distributors of 
        record'' means those distributors with whom a 
        manufacturer has established an ongoing relationship to 
        distribute such manufacturer's products, and
          [(B)] (2) the term ``wholesale distribution'' means 
        distribution of drugs subject to subsection (b) to 
        other than the consumer or patient but does not include 
        intracompany sales and does not include distributions 
        of drugs described in subsection (c)(3)(B).

           *       *       *       *       *       *       *


         Subchapter H--Pharmaceutical Distribution Supply Chain

SEC. 581. DEFINITIONS.

  In this subchapter:
          (1) Authorized.--The term ``authorized'' means--
                  (A) in the case of a manufacturer or 
                repackager, having a valid registration in 
                accordance with section 510; and
                  (B) in the case of a wholesale distributor, 
                third-party logistics provider, or dispenser, 
                licensed (as defined in this section).
          (2) Dispenser.--The term ``dispenser''--
                  (A) subject to subparagraph (C), means a 
                retail pharmacy, hospital pharmacy, a group of 
                chain pharmacies under common ownership and 
                control, or any other person authorized by law 
                to dispense or administer prescription drugs, 
                to the extent such pharmacy, group, or person 
                does not act as a wholesale distributor;
                  (B) includes warehouses and distribution 
                centers under common ownership or control of 
                entities described in subparagraph (A) that are 
                members of an affiliated group pursuant to 
                section 1504(a) of the Internal Revenue Code of 
                1986, to the extent such warehouses and 
                distribution centers do not act as a wholesale 
                distributor; and
                  (C) does not include a person who only 
                dispenses prescription drug product to be used 
                in animals in accordance with section 
                512(a)(5).
          (3) Disposition.--The term ``disposition'', with 
        respect to a prescription drug product within the 
        possession and control of an entity--
                  (A) means the removal of such prescription 
                drug product, or taking measures to prevent the 
                introduction of such prescription drug product, 
                from the pharmaceutical distribution supply 
                chain; and
                  (B) may include disposal, return of the 
                prescription drug product for disposal, or 
                other appropriate handling and other actions 
                such as retaining a sample of the prescription 
                drug product for additional physical 
                examination or laboratory analysis by a 
                manufacturer or regulatory or law enforcement 
                agency.
          (4) Distribute or distribution.--The terms 
        ``distribute'' and ``distribution'' mean the sale, 
        purchase, trade, delivery, handling, or storage of a 
        prescription drug product.
          (5) Illegitimate prescription drug product.--The term 
        ``illegitimate prescription drug product'' means a 
        prescription drug product which a manufacturer has 
        confirmed--
                  (A) is counterfeit, diverted, or stolen;
                  (B) is intentionally adulterated such that 
                the prescription drug product would result in 
                serious adverse health consequences or death to 
                humans; or
                  (C) is otherwise unfit for distribution such 
                that the prescription drug product is 
                reasonably likely to cause serious adverse 
                human health consequences or death.
          (6) Licensed.--The term ``licensed'' means--
                  (A) in the case of a wholesale distributor, 
                having a valid license to make wholesale 
                distributions consistent with the standards 
                under section 583;
                  (B) in the case of a third-party logistics 
                provider, having a valid license to engage in 
                the activities of a third-party logistics 
                provider in accordance with section 584; and
                  (C) in the case of a dispenser, having a 
                valid license to dispense prescription drugs 
                under State law.
          (7) Manufacturer.--The term ``manufacturer'' means, 
        with respect to a prescription drug product--
                  (A) a person that holds an application 
                approved under section 505 or a license issued 
                under section 351 of the Public Health Service 
                Act for such prescription drug product, or if 
                such prescription drug product is not the 
                subject of an approved application or license, 
                the person who manufactured the prescription 
                drug product;
                  (B) a co-licensed partner of the person 
                described in subparagraph (A) that obtains the 
                prescription drug product directly from the 
                person described in such subparagraph; or
                  (C) a person that--
                          (i) is a member of an affiliated 
                        group (as defined in section 1504(a) of 
                        the Internal Revenue Code of 1986) to 
                        which a person described in 
                        subparagraph (A) or (B) is also a 
                        member; and
                          (ii) receives the prescription drug 
                        product directly from a person 
                        described in subparagraph (A) or (B).
          (8) Package.--
                  (A) In general.--The term ``package'' means 
                the smallest individual saleable unit of 
                prescription drug product for distribution in 
                interstate commerce by a manufacturer or 
                repackager that is intended by the manufacturer 
                for ultimate sale to the dispenser of such 
                prescription drug product.
                  (B) Individual saleable unit.--The term 
                ``individual saleable unit'' means the smallest 
                container of prescription drug product 
                introduced into interstate commerce by the 
                manufacturer or repackager that is intended by 
                the manufacturer for individual sale to a 
                dispenser.
          (9) Prescription drug.--The term ``prescription 
        drug'' means a drug for human use subject to section 
        503(b)(1).
          (10) Prescription drug product.--The term 
        ``prescription drug product'' means a prescription drug 
        in a finished dosage form for administration to a 
        patient without substantial further manufacturing (such 
        as capsules, tablets, and lyophilized prescription drug 
        products before reconstitution).
          (11) Prescription drug product identifier.--The term 
        ``prescription drug product identifier'' means a 
        standardized graphic that--
                  (A) includes the standardized numerical 
                identifier, lot number, and expiration date of 
                a prescription drug product; and
                  (B) is in both human-readable form and on a 
                machine-readable data carrier that conforms to 
                the standards developed by a widely recognized 
                international standards development 
                organization.
          (12) Quarantine.--The term ``quarantine'' means to 
        store or identify a product, for the purpose of 
        preventing distribution or transfer of the product, in 
        a physically separate area clearly identified for such 
        use, or through use of other procedures such as 
        automated designation.
          (13) Repackager.--The term ``repackager'' means a 
        person who owns or operates an establishment that 
        repacks and relabels a prescription drug product or 
        package for further sale or distribution.
          (14) Return.--The term ``return'' means providing 
        prescription drug product to the authorized trading 
        partner or trading partners from which such 
        prescription drug product was purchased or received, or 
        to a returns processor for handling of such 
        prescription drug product.
          (15) Returns processor.--The terms ``returns 
        processor'' mean a person who owns or operates an 
        establishment that provides for the disposition of or 
        otherwise processes saleable and nonsaleable 
        prescription drug product received from an authorized 
        trading partner such that the prescription drug product 
        may be processed for credit to the purchaser, 
        manufacturer, seller, or disposed of for no further 
        distribution.
          (16) Specific patient need.--The term ``specific 
        patient need''--
                  (A) means with respect to the transfer of a 
                prescription drug product from one pharmacy to 
                another, to fill a prescription for an 
                identified patient; and
                  (B) does not include the transfer of a 
                prescription drug product from one pharmacy to 
                another for the purpose of increasing or 
                replenishing stock in anticipation of a 
                potential need.
          (17) Standardized numerical identifier.--The term 
        ``standardized numerical identifier'' means a set of 
        numbers or characters that--
                  (A) is used to uniquely identify each package 
                or homogenous case of the prescription drug 
                product; and
                  (B) is composed of the National Drug Code 
                that corresponds to the specific prescription 
                drug product (including the particular package 
                configuration) combined with a unique 
                alphanumeric serial number of up to 20 
                characters.
          (18) Suspect prescription drug product.--The term 
        ``suspect prescription drug product'' means a 
        prescription drug product for which there is reason to 
        believe that such prescription drug product--
                  (A) is potentially counterfeit, diverted, or 
                stolen;
                  (B) is potentially intentionally adulterated 
                such that the prescription drug product would 
                result in serious adverse health consequences 
                or death to humans; or
                  (C) appears otherwise unfit for distribution 
                such that the prescription drug product would 
                result in serious adverse health consequences 
                or death to humans.
          (19) Third-party logistics provider.--The term 
        ``third-party logistics provider'' means an entity that 
        provides or coordinates warehousing, distribution, or 
        other logistics services of a prescription drug product 
        in interstate commerce on behalf of a manufacturer, 
        wholesale distributor, or dispenser of a prescription 
        drug product, but does not take ownership of the 
        prescription drug product, nor have responsibility to 
        direct the sale or disposition of, the prescription 
        drug product.
          (20) Trading partner.--The term ``trading partner'' 
        means--
                  (A) a manufacturer, repackager, wholesale 
                distributor, or dispenser from whom a 
                manufacturer, repackager, wholesale 
                distributor, or dispenser accepts ownership of 
                a prescription drug product or to whom a 
                manufacturer, repackager, wholesale 
                distributor, or dispenser transfers ownership 
                of a prescription drug product; or
                  (B) a third-party logistics provider from 
                whom a manufacturer, repackager, wholesale 
                distributor, or dispenser accepts possession of 
                a prescription drug product or to whom a 
                manufacturer, repackager, wholesale 
                distributor, or dispenser transfers possession 
                of a prescription drug product.
          (21) Transaction.--
                  (A) In general.--The term ``transaction'' 
                means the transfer in interstate commerce of 
                prescription drug product between persons in 
                which a change of ownership occurs.
                  (B) Exemptions.--The term ``transaction'' 
                does not include--
                          (i) intracompany distribution of any 
                        prescription drug product, including 
                        between members of an affiliated group 
                        (as defined in section 1504(a) of the 
                        Internal Revenue Code of 1986);
                          (ii) the distribution of a 
                        prescription drug product among 
                        hospitals or other health care entities 
                        that are under common control;
                          (iii) the distribution of a 
                        prescription drug product for emergency 
                        medical reasons including a public 
                        health emergency declaration pursuant 
                        to section 319 of the Public Health 
                        Service Act, except that a drug 
                        shortage not caused by a public health 
                        emergency shall not constitute an 
                        emergency medical reason;
                          (iv) the dispensing of a prescription 
                        drug product pursuant to a valid 
                        prescription executed in accordance 
                        with section 503(b)(1);
                          (v) the distribution of prescription 
                        drug product samples by a manufacturer 
                        or a licensed wholesale distributor in 
                        accordance with section 503(d);
                          (vi) the distribution of blood or 
                        blood components intended for 
                        transfusion;
                          (vii) the distribution of minimal 
                        quantities of prescription drug product 
                        by a licensed retail pharmacy to a 
                        licensed practitioner for office use;
                          (viii) the distribution of a 
                        prescription drug product by a 
                        charitable organization to a nonprofit 
                        affiliate of the organization to the 
                        extent otherwise permitted by law;
                          (ix) the distribution of a 
                        prescription drug product pursuant to 
                        the sale or merger of a pharmacy or 
                        pharmacies or a wholesale distributor 
                        or wholesale distributors, except that 
                        any records required to be maintained 
                        for the prescription drug product shall 
                        be transferred to the new owner of the 
                        pharmacy or pharmacies or wholesale 
                        distributor or wholesale distributors;
                          (x) the dispensing of a prescription 
                        drug product approved under section 
                        512(b);
                          (xi) the transfer of prescription 
                        drug products to or from any facility 
                        that is licensed by the Nuclear 
                        Regulatory Commission or by a State 
                        pursuant to an agreement with such 
                        Commission under section 274 of the 
                        Atomic Energy Act of 1954 (42 U.S.C. 
                        2021);
                          (xii) the distribution of a 
                        combination product that consists of--
                                  (I) a product comprised of 
                                two or more components that are 
                                each a drug, biological 
                                product, or device and that are 
                                physically, chemically, or 
                                otherwise combined or mixed and 
                                produced as a single entity;
                                  (II) two or more separate 
                                products packaged together in a 
                                single package or as a unit and 
                                comprised of a drug and device 
                                or a device and biological 
                                product; or
                                  (III) two or more finished 
                                devices plus one or more drug 
                                or biological products which 
                                are packaged together in a 
                                medical convenience kit 
                                described in clause (xiv);
                          (xiii) the distribution of a medical 
                        convenience kit which is a collection 
                        of finished products (consisting of 
                        devices or drugs) assembled in kit form 
                        strictly for the convenience of the 
                        purchaser or user if--
                                  (I) the medical convenience 
                                kit is assembled in an 
                                establishment that is 
                                registered with the Food and 
                                Drug Administration as a 
                                medical device manufacturer;
                                  (II) the person who 
                                manufacturers the medical 
                                convenience kit purchased the 
                                prescription drug product 
                                directly from the manufacturer 
                                or from a wholesale distributor 
                                that purchased the prescription 
                                drug product directly from the 
                                manufacturer;
                                  (III) the person who 
                                manufacturers the medical 
                                convenience kit does not alter 
                                the primary container or label 
                                of the prescription drug 
                                product as purchased from the 
                                manufacturer or wholesale 
                                distributor;
                                  (IV) the medical convenience 
                                kit does not contain a 
                                controlled substance (as 
                                defined in section 102 of the 
                                Controlled Substances Act); and
                                  (V) the prescription drug 
                                products contained in the 
                                medical convenience kit are--
                                          (aa) intravenous 
                                        solutions intended for 
                                        the replenishment of 
                                        fluids and 
                                        electrolytes;
                                          (bb) drugs intended 
                                        to maintain the 
                                        equilibrium of water 
                                        and minerals in the 
                                        body;
                                          (cc) drugs intended 
                                        for irrigation or 
                                        reconstitution;
                                          (dd) anesthetics;
                                          (ee) anticoagulants;
                                          (ff) vasopressors; or
                                          (gg) 
                                        sympathicomimetics;
                          (xiv) the distribution of an 
                        intravenous prescription drug product 
                        that, by its formulation, is intended 
                        for the replenishment of fluids and 
                        electrolytes (such as sodium, chloride, 
                        and potassium) or calories (such as 
                        dextrose and amino acids);
                          (xv) the distribution of an 
                        intravenous prescription drug product 
                        used to maintain the equilibrium of 
                        water and minerals in the body, such as 
                        dialysis solutions;
                          (xvi) the distribution of a 
                        prescription drug product that is 
                        intended for irrigation or 
                        reconstitution, or sterile water, 
                        whether intended for such purposes or 
                        for injection;
                          (xvii) the distribution of compressed 
                        medical gas; or
                          (xviii)(I) the distribution of a 
                        product by a dispenser, or a wholesale 
                        distributor acting at the direction of 
                        the dispenser, to a repackager 
                        registered under section 510 for the 
                        purpose of repackaging the drug for use 
                        by that dispenser or another health 
                        care entity that is under the 
                        dispenser's ownership or control, so 
                        long as the dispenser retains ownership 
                        of the prescription drug product; and
                          (II) the saleable or nonsaleable 
                        return by such repackager of such 
                        prescription drug product.
                  (C) Compressed medical gas.--For purposes of 
                subparagraph (B)(xviii), the term ``compressed 
                medical gas'' means any substance in its 
                gaseous or cryogenic liquid form that meets 
                medical purity standards and has application in 
                a medical or homecare environment, including 
                oxygen and nitrous oxide.
          (22) Transaction history.--The term ``transaction 
        history'' means a statement that--
                  (A) includes the transaction information for 
                each transaction conducted with respect to a 
                prescription drug product beginning with the 
                manufacturer or initial purchase distributor 
                for each prior transaction going back to the 
                manufacturer of the prescription drug product 
                or to the initial purchase distributor; and
                  (B) is in paper or electronic form.
          (23) Transaction information.--The term ``transaction 
        information'' means--
                  (A) the proprietary or established name or 
                names of the prescription drug product;
                  (B) the strength and dosage form of the 
                prescription drug product;
                  (C) the National Drug Code number of the 
                prescription drug product;
                  (D) the container size;
                  (E) the number of containers;
                  (F) the lot number of the prescription drug 
                product;
                  (G) the date of the transaction;
                  (H) the business name and address of the 
                person from whom ownership is being 
                transferred; and
                  (I) the business name and address of the 
                person to whom ownership is being transferred.
          (24) Transaction statement.--The ``transaction 
        statement'' is a statement, which states that the 
        manufacturer, repackager, wholesale distributor, third-
        party logistics provider, or dispenser transferring 
        ownership in a transaction--
                  (A) is authorized;
                  (B) received transaction information and a 
                transaction statement as required under section 
                582 from the prior owner of the prescription 
                drug product;
                  (C) did not knowingly and intentionally ship 
                an illegitimate prescription drug product;
                  (D) did not knowingly and intentionally 
                provide false transaction information; and
                  (E) did not knowingly and intentionally alter 
                the transaction history.
          (25) Verification and verify.--The terms 
        ``verification'' and ``verify''--
                  (A) mean determining whether the prescription 
                drug product identifier affixed to, or 
                imprinted upon, a package or homogeneous case 
                of the prescription drug product corresponds to 
                the standardized numerical identifier or lot 
                number, and expiration date assigned to the 
                prescription drug product by the manufacturer 
                or the repackager, as applicable; and
                  (B) include making the determination under 
                subparagraph (A) using human-readable or 
                machine-readable methods.
          (26) Wholesale distributor.--The term ``wholesale 
        distributor''--
                  (A) means a person engaged in wholesale 
                distribution (as defined in section 583); and
                  (B) excludes--
                          (i) a manufacturer, a co-licensed 
                        partner of a manufacturer, or a third-
                        party logistics provider, or a 
                        dispenser who does not engage in such 
                        wholesale distribution;
                          (ii) a repackager engaged in such 
                        wholesale distribution; or
                          (iii) the distribution of 
                        prescription drug product or an offer 
                        to distribute prescription drug product 
                        by an authorized repackager that has 
                        taken ownership or possession of the 
                        prescription drug product and repacked 
                        the prescription drug product in 
                        accordance with the requirements of 
                        section 582(e).

SEC. 582. REQUIREMENTS.

  (a) In General.--
          (1) Compliance required.--An entity that is a 
        manufacturer, repackager, wholesale distributor, third-
        party logistics provider, or dispenser shall comply 
        with the requirements of this section. If an entity 
        meets the definition of more than one of the entities 
        referred to in the preceding sentence, such entity 
        shall comply with all applicable requirements of this 
        section, but shall not be required to comply with 
        duplicative requirements.
          (2) Standards.--The Secretary shall, in consultation 
        with other appropriate Federal officials, 
        manufacturers, repackagers, wholesale distributors, 
        third-party logistics providers, and dispensers, 
        establish, by regulation, standards for the exchange of 
        transaction information for purposes of complying with 
        this section. The standards established under this 
        paragraph shall be in accordance with a form developed 
        by a widely recognized international standards 
        development organization. In establishing such 
        standards, the Secretary shall consider the feasibility 
        of establishing standardized documentation to be used 
        by all members of the pharmaceutical distribution 
        supply chain to convey the transaction history and 
        transaction statement to the subsequent owner of a 
        prescription drug product. The Secretary shall publish 
        such standards not later than 180 days after the date 
        of the enactment of the Safeguarding America's 
        Pharmaceuticals Act of 2013.
          (3) Waivers, exceptions, and exemptions.--Not later 
        than one year after the date of the enactment of the 
        Safeguarding America's Pharmaceuticals Act of 2013, the 
        Secretary shall promulgate a regulation to--
                  (A) establish a process by which the 
                Secretary may grant, at the request of an 
                authorized manufacturer, repackager, wholesale 
                distributor, or dispenser, a waiver from any of 
                the requirements of this section--
                          (i) if the Secretary determines that 
                        such requirements would result in an 
                        undue economic hardship; or
                          (ii) for emergency medical reasons, 
                        including a public health emergency 
                        declaration pursuant to section 319 of 
                        the Public Health Service Act;
                  (B) establish a process, with respect to the 
                prescription drug product identifier 
                requirement under paragraph (2) of subsections 
                (b), (c), (d), and (e) through which--
                          (i) a manufacturer or repackager may 
                        request a waiver with respect to 
                        prescription drug products that are 
                        packaged in a container too small or 
                        otherwise unable to accommodate a label 
                        with sufficient space to bear the 
                        information required for compliance 
                        with such requirement; and
                          (ii) the Secretary determines whether 
                        to waive such requirement; and
                  (C) establish a process by which the 
                Secretary may add the prescription drug 
                products or transactions that are exempt from 
                the requirements of this section.
          (4) Grandfathered persons and prescription drug 
        products.--
                  (A) In general.--Not later than one year 
                after the date of the enactment of the 
                Safeguarding America's Pharmaceuticals Act of 
                2013, the Secretary shall specify, by 
                regulation, whether and under what 
                circumstances the prescription drug product 
                identifier requirement under paragraph (2) of 
                subsections (b), (c), (d), and (e) shall apply 
                to a prescription drug product that is in the 
                supply chain or in a manufacturer's inventory 
                on the date of the enactment of the 
                Safeguarding America's Pharmaceuticals Act of 
                2013.
                  (B) Third-party logistics provider 
                licenses.--Until the date that is 1 year after 
                the effective date of the third-party logistics 
                provider licensing requirements under section 
                584, a third-party logistics provider shall be 
                considered ``licensed'' under section 581(6)(B) 
                unless the Secretary has made a finding that 
                the third-party logistics provider does not 
                utilize good handling and distribution 
                practices and publishes notice thereof.
                  (C) Label changes.--Changes made to package 
                labels solely to incorporate the prescription 
                drug product identifier may be submitted to the 
                Secretary in the annual report of an 
                establishment, in accordance with section 
                314.70(d) of chapter 21, Code of Federal 
                Regulations (or any successor regulation).
  (b) Manufacturer Requirements.--
          (1) Prescription drug product tracing.--
                  (A) In general.--Beginning not later than 
                January 1, 2015, a manufacturer shall--
                          (i) prior to, or at the time of, each 
                        transaction in which such manufacturer 
                        transfers ownership of a prescription 
                        drug product, provide the subsequent 
                        owner with the transaction history and 
                        a transaction statement; and
                          (ii) maintain the transaction 
                        information for each such transaction 
                        for not less than 3 years after the 
                        date of the transaction.
                  (B) Requests for information.--Upon a request 
                by the Secretary or other appropriate Federal 
                or State official, in the event of a recall or 
                for the purpose of investigating a suspect 
                prescription drug product or an illegitimate 
                prescription drug product, a manufacturer 
                shall, not later than 2 business days after 
                receiving the request or in such reasonable 
                time as determined by the Secretary, provide to 
                the Secretary or other official, the applicable 
                transaction history and transaction statement 
                for the prescription drug product.
          (2) Prescription drug product identifier.--Beginning 
        not later than 5 years after the date of the enactment 
        of the Safeguarding America's Pharmaceuticals Act of 
        2013, a manufacturer shall affix or imprint a 
        prescription drug product identifier on each package 
        and homogenous case of a prescription drug product 
        intended to be introduced in a transaction. Such 
        manufacturer shall maintain the information in the 
        prescription drug product identifier for such 
        prescription drug product for not less than 3 years 
        after the date of the transaction.
          (3) Authorized trading partners.--Beginning not later 
        than January 1, 2015, a manufacturer shall ensure that 
        each of its trading partners is authorized.
          (4) List of authorized distributors of record.--
        Beginning not later than January 1, 2015, each 
        manufacturer of a prescription drug shall--
                  (A) maintain a list of the authorized 
                distributors of record of such drug at the 
                corporate offices of such manufacturer;
                  (B) make such list publicly available, 
                including placement on the Internet Website of 
                such manufacturer; and
                  (C) update such list not less than once per 
                quarter.
          (5) Verification.--Beginning not later than January 
        1, 2015, a manufacturer shall implement systems and 
        processes to enable the manufacturer to comply with the 
        following requirements:
                  (A) Suspect prescription drug product.--
                          (i) In general.--Upon making a 
                        determination that a prescription drug 
                        product in the possession or control of 
                        the manufacturer is a suspect 
                        prescription drug product, or upon 
                        receiving a request for verification 
                        from the Secretary that a prescription 
                        drug product within the possession or 
                        control of a manufacturer is a suspect 
                        prescription drug product, a 
                        manufacturer shall promptly conduct an 
                        investigation in coordination with 
                        trading partners, as applicable, to 
                        determine whether the prescription drug 
                        product is an illegitimate prescription 
                        drug product. Beginning not later than 
                        5 years after the date of the enactment 
                        of the Safeguarding America's 
                        Pharmaceuticals Act of 2013, such 
                        investigation shall include--
                                  (I) verifying the 
                                prescription drug product at 
                                the package level;
                                  (II) validating any 
                                applicable transaction history 
                                in the possession of the 
                                manufacturer; and
                                  (III) otherwise investigating 
                                to determine whether the 
                                prescription drug product is an 
                                illegitimate prescription drug 
                                product.
                          (ii) Cleared prescription drug 
                        product.--If the manufacturer 
                        determines that a suspect prescription 
                        drug product is not an illegitimate 
                        prescription drug product, the 
                        manufacturer shall promptly notify the 
                        Secretary of such determination and 
                        such prescription drug product may be 
                        further distributed.
                          (iii) Records.--A manufacturer shall 
                        keep records of its investigation of a 
                        suspect prescription drug product for 
                        not less than 3 years after the 
                        conclusion of the investigation.
                  (B) Illegitimate prescription drug product.--
                          (i) In general.--Upon determining 
                        that a prescription drug product in the 
                        possession or control of a manufacturer 
                        is an illegitimate prescription drug 
                        product, the manufacturer shall--
                                  (I) quarantine such 
                                prescription drug product from 
                                prescription drug product 
                                intended for distribution; and
                                  (II) provide for the 
                                disposition of the illegitimate 
                                prescription drug product.
                          (ii) Trading partner.--Upon 
                        determining that a prescription drug 
                        product in the possession or control of 
                        a trading partner is an illegitimate 
                        prescription drug product, the 
                        manufacturer shall take reasonable 
                        steps to assist a trading partner to 
                        provide for the disposition of the 
                        illegitimate prescription drug product.
                          (iii) Making a notification.--Upon 
                        determining that a prescription drug 
                        product in the possession or control of 
                        the manufacturer is an illegitimate 
                        prescription drug product, the 
                        manufacturer shall notify the Secretary 
                        of such determination not later than 24 
                        hours after making such determination. 
                        The Secretary shall determine whether 
                        additional trading partner notification 
                        is appropriate.
                          (iv) Responding to a notification.--
                        Upon the receipt of a notification from 
                        the Secretary that a determination has 
                        been made that a prescription drug 
                        product is an illegitimate prescription 
                        drug product, a manufacturer shall--
                                  (I) identify all illegitimate 
                                prescription drug products that 
                                are subject to such 
                                notification and in the 
                                possession or control of the 
                                manufacturer, including any 
                                prescription drug product that 
                                is subsequently received; and
                                  (II) perform the activities 
                                described in clause (i).
                          (v) Records.--A manufacturer shall 
                        keep records of the disposition of an 
                        illegitimate prescription drug product 
                        for not less than 3 years after the 
                        conclusion of the disposition.
                  (C) Electronic database.--A manufacturer may 
                satisfy the requirements of this paragraph 
                through the use of a secure electronic database 
                developed and operated by the manufacturer or 
                another entity. The owner of such database 
                shall establish the requirements and processes 
                to respond to requests and may provide for data 
                access to other members of the pharmaceutical 
                distribution supply chain, as appropriate. The 
                development and operation of such a database 
                shall not relieve a manufacturer of the 
                requirement under this paragraph to respond to 
                a verification request submitted by means other 
                than a secure electronic database.
                  (D) Returned prescription drug product.--
                Beginning not later than 5 years after the date 
                of the enactment of the Safeguarding America's 
                Pharmaceuticals Act of 2013, upon receipt of a 
                returned prescription drug product that the 
                manufacturer intends to further distribute, 
                before further distributing such prescription 
                drug product, the manufacturer shall--
                          (i) verify the prescription drug 
                        product identifier for each sealed 
                        homogeneous case of such prescription 
                        drug product; or
                          (ii) if such prescription drug 
                        product is not in a sealed homogeneous 
                        case, verify the prescription drug 
                        product identifier on each package.
  (c) Wholesale Distributor Requirements.--
          (1) Prescription drug product tracing.--
                  (A) In general.--Beginning not later than 
                April 1, 2015, a wholesale distributor shall--
                          (i) not accept ownership of a 
                        prescription drug product unless the 
                        previous owner prior to, or at the time 
                        of, the transaction provides the 
                        applicable transaction history and a 
                        transaction statement for the 
                        prescription drug product;
                          (ii) prior to, or at the time of, 
                        each transaction in which the wholesale 
                        distributor transfers ownership of a 
                        prescription drug product--
                                  (I) in the case that the 
                                wholesale distributor purchased 
                                the prescription drug product 
                                directly from the manufacturer, 
                                provide the subsequent owner 
                                with transaction history and a 
                                transaction statement for the 
                                prescription drug product; or
                                  (II) in the case that the 
                                wholesale distributor did not 
                                purchase the prescription drug 
                                product directly from the 
                                manufacturer, the exclusive 
                                distributor of the 
                                manufacturer, or a repackager 
                                that purchased directly from 
                                the manufacturer, provide the 
                                subsequent owner with 
                                transaction history beginning 
                                with the wholesale distributor 
                                that did purchase the product 
                                directly from the manufacturer, 
                                the exclusive distributor of 
                                the manufacturer, or a 
                                repackager that purchased 
                                directly from the manufacturer;
                          (iii) notwithstanding clause (ii), if 
                        the wholesale distributor purchased the 
                        prescription drug product directly from 
                        the manufacturer, its exclusive 
                        distributor, or a repackager that 
                        purchased directly from the 
                        manufacturer or its authorized 
                        distributor of record--
                                  (I) provide an initial 
                                purchase transaction statement 
                                on the invoice to the customer, 
                                stating that the wholesale 
                                distributor purchased the 
                                prescription drug product 
                                package directly from the 
                                manufacturer, exclusive 
                                distributor, or repackager;
                                  (II) make available to the 
                                immediate subsequent recipient 
                                of such prescription drug 
                                product the information 
                                required under clause (ii) 
                                through any combination of 
                                self-generated paper, 
                                electronic data, or 
                                manufacturer-provided 
                                information on the prescription 
                                drug product package; and
                                  (III) for purposes of 
                                subclauses (I) and (II), need 
                                not include any transactions 
                                occurring before the transfer 
                                of the prescription drug 
                                product to the wholesale 
                                distributor; and
                          (iv) maintain the transaction 
                        information for each transaction 
                        described in clauses (i) and (ii) for 
                        not less than 3 years after the 
                        transaction.
                  (B) Returns exception.--
                          (i) Saleable returns.--
                        Notwithstanding subparagraph (A), a 
                        wholesale distributor may--
                                  (I) accept returned 
                                prescription drug product 
                                without a transaction history 
                                from a dispenser or repackager; 
                                and
                                  (II) distribute such returned 
                                prescription drug product with 
                                a transaction history that 
                                begins with the wholesale 
                                distributor that so accepted 
                                the returned product.
                          (ii) Nonsaleable returns.--A 
                        wholesale distributor may return a 
                        nonsaleable prescription drug to the 
                        manufacturer or repackager, to the 
                        wholesale distributor from whom such 
                        prescription drug was purchased, or to 
                        a person acting on behalf of such a 
                        person, including a returns processor, 
                        without providing the information 
                        required under subparagraph (A).
                  (C) Requests for information.--Upon a request 
                by the Secretary or other appropriate Federal 
                or State official, in the event of a recall or 
                for the purpose of investigating a suspect 
                prescription drug product or an illegitimate 
                prescription drug product a wholesale 
                distributor shall, not later than 2 business 
                days after receiving the request or in such 
                other reasonable time as determined by the 
                Secretary, provide the applicable transaction 
                history and transaction statements for the 
                prescription drug product.
          (2) Prescription drug product identifier.--Beginning 
        not later than 7 years after the date of the enactment 
        of the Safeguarding America's Pharmaceuticals Act of 
        2013, a wholesale distributor may engage in 
        transactions involving a prescription drug product only 
        if such prescription drug product is encoded with a 
        prescription drug product identifier, except as 
        provided in subsection (a)(4).
          (3) Authorized trading partners.--Beginning not later 
        than January 1, 2015, a wholesale distributor shall 
        ensure that each of its trading partners is authorized.
          (4) Verification.--Beginning not later than April 1, 
        2015, a wholesale distributor shall implement systems 
        to enable the wholesale distributor to comply with the 
        following requirements:
                  (A) Suspect prescription drug product.--
                          (i) In general.--Upon making a 
                        determination that a prescription drug 
                        product in the possession or control of 
                        the wholesale distributor is a suspect 
                        prescription drug product, or upon 
                        receiving a request for verification 
                        from the Secretary that a prescription 
                        drug product within the possession or 
                        control of a wholesale distributor is a 
                        suspect prescription drug product, a 
                        wholesale distributor shall promptly 
                        conduct an investigation to determine 
                        whether the prescription drug product 
                        is an illegitimate prescription drug 
                        product. Beginning not later than 7 
                        years after the date of the enactment 
                        of the Safeguarding America's 
                        Pharmaceuticals Act of 2013, such 
                        investigation shall include--
                                  (I) verifying a package of 
                                the prescription drug product;
                                  (II) validating any 
                                applicable transaction history 
                                in the possession of the 
                                wholesale distributor; and
                                  (III) otherwise investigating 
                                to determine whether the 
                                prescription drug product is an 
                                illegitimate prescription drug 
                                product.
                          (ii) Cleared prescription drug 
                        product.--If the wholesale distributor 
                        determines that a suspect prescription 
                        drug product is not an illegitimate 
                        prescription drug product, the 
                        wholesale distributor shall promptly 
                        notify the Secretary of such 
                        determination and such prescription 
                        drug product may be further 
                        distributed.
                          (iii) Records.--A wholesale 
                        distributor shall keep records of its 
                        investigation of a suspect prescription 
                        drug product for not less than 3 years 
                        after the conclusion of the 
                        investigation.
                  (B) Illegitimate prescription drug product.--
                          (i) In general.--Upon receiving 
                        notice that a manufacturer of a 
                        prescription drug product has 
                        determined that a prescription drug 
                        product in the possession or control of 
                        a wholesale distributor is an 
                        illegitimate prescription drug product, 
                        the wholesale distributor shall--
                                  (I) quarantine such 
                                prescription drug product 
                                within the possession or 
                                control of the wholesale 
                                distributor from prescription 
                                drug product intended for 
                                distribution; and
                                  (II) provide for the 
                                disposition of the illegitimate 
                                prescription drug product 
                                within the possession or 
                                control of the wholesale 
                                distributor.
                          (ii) Trading partner.--Upon 
                        determining that a prescription drug 
                        product in the possession or control of 
                        a trading partner is an illegitimate 
                        prescription drug product, the 
                        wholesale distributor shall take 
                        reasonable steps to assist a trading 
                        partner to provide for the disposition 
                        of the illegitimate prescription drug 
                        product.
                          (iii) Making a notification.--Upon 
                        determining that a prescription drug 
                        product in the possession or control of 
                        the wholesale distributor is an 
                        illegitimate prescription drug product, 
                        the wholesale distributor shall notify 
                        the Secretary of such determination not 
                        later than 24 hours after making such 
                        determination. The Secretary shall 
                        determine whether additional trading 
                        partner notification is appropriate.
                          (iv) Responding to a notification.--
                        Upon the receipt of a notification from 
                        the Secretary that a determination has 
                        been made that a prescription drug 
                        product is an illegitimate prescription 
                        drug product, a wholesale distributor 
                        shall--
                                  (I) identify all illegitimate 
                                prescription drug product 
                                subject to such notification 
                                that is in the possession or 
                                control of the wholesale 
                                distributor, including any 
                                prescription drug product that 
                                is subsequently received; and
                                  (II) perform the activities 
                                described in clause (i).
                          (v) Records.--A wholesale distributor 
                        shall keep records of the disposition 
                        of an illegitimate prescription drug 
                        product for not less than 3 years after 
                        the conclusion of the disposition.
                  (C) Electronic database.--A wholesale 
                distributor may satisfy the requirements of 
                this paragraph through the use of a secure 
                electronic database developed and operated by 
                the manufacturer or another entity. The owner 
                of such database shall establish the 
                requirements and processes to respond to 
                requests and may provide for data access to 
                other members of the pharmaceutical 
                distribution supply chain, as appropriate. The 
                development and operation of such a database 
                shall not relieve a wholesale distributor of 
                the requirement under this paragraph to respond 
                to a verification request submitted by means 
                other than a secure electronic database.
                  (D) Returned prescription drug product.--
                Beginning not later than 7 years after the date 
                of the enactment of the Safeguarding America's 
                Pharmaceuticals Act of 2013, upon receipt of a 
                returned prescription drug product that the 
                wholesale distributor intends to further 
                distribute, before further distributing such 
                prescription drug product, the wholesale 
                distributor shall--
                          (i) verify the prescription drug 
                        product identifier for each sealed 
                        homogeneous case of such prescription 
                        drug product; or
                          (ii) if such prescription drug 
                        product is not in a sealed homogeneous 
                        case, verify the prescription drug 
                        product identifier on each package.
  (d) Dispenser Requirements.--
          (1) Prescription drug product tracing.--
                  (A) In general.--Beginning not later than 
                July 1, 2015, a dispenser--
                          (i) shall not accept ownership of a 
                        prescription drug product, unless the 
                        previous owner prior to, or at the time 
                        of, the transaction, provides 
                        transaction history and a transaction 
                        statement;
                          (ii) prior to, or at the time of, 
                        each transaction in which the dispenser 
                        transfers ownership of a prescription 
                        drug product (but not including 
                        dispensing to a patient or returns) 
                        shall provide the subsequent owner with 
                        transaction history and a transaction 
                        statement for the prescription drug 
                        product, except that the requirements 
                        of this clause shall not apply to sales 
                        by a dispenser to another dispenser to 
                        fulfill a specific patient need; and
                          (iii) shall maintain transaction 
                        information for a period of not less 
                        than 3 years after the date of the 
                        transaction.
                  (B) Agreements with third parties.--A 
                dispenser may enter into a written agreement 
                with a third party, including an authorized 
                wholesale distributor, under which the third 
                party confidentially maintains the transaction 
                information required to be maintained under 
                this subsection on behalf of the dispenser. If 
                a dispenser enters into such an agreement, the 
                dispenser shall maintain a copy of the written 
                agreement.
                  (C) Returns exception.--
                          (i) Saleable returns.--
                        Notwithstanding subparagraph (A)(ii), a 
                        dispenser may return prescription drug 
                        product to the trading partner from 
                        which the dispenser obtained the 
                        prescription drug product without 
                        providing the information required 
                        under such subparagraph.
                          (ii) Nonsaleable returns.--
                        Notwithstanding subparagraph (A)(ii), a 
                        dispenser may return a nonsaleable 
                        prescription drug to the manufacturer 
                        or repackager, to the wholesale 
                        distributor from whom such prescription 
                        drug was purchased, to a returns 
                        processor, or to a person acting on 
                        behalf of such persons without 
                        providing the information required 
                        under such subparagraph.
                  (D) Requests for information.--Upon a request 
                by the Secretary or other appropriate Federal 
                or State official, in the event of a recall or 
                for the purpose of investigating a suspect 
                prescription drug product or an illegitimate 
                prescription drug product, a dispenser shall, 
                not later than 2 business days after receiving 
                the request or in another such reasonable time 
                as determined by the Secretary, provide lot 
                level transaction information.
          (2) Prescription drug product identifier.--Beginning 
        not later than 8 years after the date of the enactment 
        of the Safeguarding America's Pharmaceuticals Act of 
        2013, a dispenser may engage in transactions involving 
        a prescription drug product only if such prescription 
        drug product is encoded with a prescription drug 
        product identifier, except as provided in subsection 
        (a)(4).
          (3) Authorized trading partners.--Beginning not later 
        than January 1, 2015, a dispenser shall ensure that 
        each of its trading partners is authorized.
          (4) Verification.--Beginning not later than January 
        1, 2015, a dispenser shall implement systems to enable 
        the dispenser to comply with the following 
        requirements:
                  (A) Suspect prescription drug product.--
                          (i) In general.--Upon making a 
                        determination that a prescription drug 
                        product in the possession or control of 
                        the dispenser is a suspect prescription 
                        drug product, or upon receiving a 
                        request for verification from the 
                        Secretary that a prescription drug 
                        product within the possession or 
                        control of a dispenser is a suspect 
                        prescription drug product, a dispenser 
                        shall promptly conduct an investigation 
                        to determine whether the prescription 
                        drug product is an illegitimate 
                        prescription drug product. Such 
                        investigation shall include--
                                  (I) verifying whether the lot 
                                number of a suspect 
                                prescription drug product 
                                corresponds with the lot number 
                                for such prescription drug 
                                product;
                                  (II) beginning 8 years after 
                                the date of the enactment of 
                                the Safeguarding America's 
                                Pharmaceuticals Act of 2013, 
                                verifying that the product 
                                identifier of at least 3 
                                packages or 10 percent of such 
                                suspect prescription drug 
                                product, whichever is greater, 
                                or all packages, if there are 
                                fewer than 3, corresponds with 
                                the prescription drug product 
                                identifier for such product;
                                  (III) validating any 
                                applicable transaction history 
                                in the possession of the 
                                dispenser; and
                                  (IV) otherwise investigating 
                                to determine whether the 
                                prescription drug product is an 
                                illegitimate prescription drug 
                                product.
                          (ii) Cleared prescription drug 
                        product.--If the dispenser makes the 
                        determination that a suspect 
                        prescription drug product is not an 
                        illegitimate prescription drug product, 
                        the dispenser shall promptly notify the 
                        Secretary of such determination and 
                        such prescription drug product may be 
                        further dispensed.
                          (iii) Records.--A dispenser shall 
                        keep records of its investigation of a 
                        suspect prescription drug product for 
                        not less than 3 years after the 
                        conclusion of the investigation.
                  (B) Illegitimate prescription drug product.--
                          (i) In general.--Upon receiving 
                        notice that a manufacturer of a 
                        prescription drug product has 
                        determined that a prescription drug 
                        product in the possession or control of 
                        a dispenser is an illegitimate 
                        prescription drug product, the 
                        dispenser shall--
                                  (I) quarantine such 
                                prescription drug product 
                                within the possession or 
                                control of the dispenser from 
                                prescription drug product 
                                intended for distribution; and
                                  (II) provide for the 
                                disposition of the illegitimate 
                                prescription drug product 
                                within the possession or 
                                control of the dispenser.
                          (ii) Trading partners.--Upon 
                        determining that a prescription drug 
                        product in the possession or control of 
                        a trading partner is an illegitimate 
                        prescription drug product, the 
                        dispenser shall take reasonable steps 
                        to assist a trading partner to provide 
                        for the disposition of the illegitimate 
                        prescription drug product.
                          (iii) Making a notification.--Upon 
                        determining that a prescription drug 
                        product in the possession or control of 
                        the dispenser is an illegitimate 
                        prescription drug product, the 
                        dispenser shall notify the Secretary of 
                        such determination not later than 24 
                        hours after making such determination. 
                        The Secretary shall determine whether 
                        additional trading partner notification 
                        is appropriate.
                          (iv) Responding to a notification.--
                        Upon the receipt of a notification from 
                        the Secretary that a determination has 
                        been made that a prescription drug 
                        product is an illegitimate prescription 
                        drug product, a dispenser shall--
                                  (I) identify all illegitimate 
                                prescription drug products that 
                                are subject to such 
                                notification and in the 
                                possession or control of the 
                                dispenser, including any 
                                prescription drug product that 
                                is subsequently received; and
                                  (II) perform the activities 
                                described in clause (i).
                          (v) Records.--A dispenser shall keep 
                        records of the disposition of an 
                        illegitimate prescription drug product 
                        for not less than 3 years after the 
                        conclusion of the disposition.
                  (C) Electronic database.--A dispenser may 
                satisfy the requirements of this paragraph 
                through the use of a secure electronic database 
                developed and operated by the manufacturer or 
                another entity. The owner of such database 
                shall establish the requirements and processes 
                to enable responding to requests and may 
                provide for data access to other members of the 
                pharmaceutical distribution supply chain, as 
                appropriate. The development and operation of 
                such a database shall not relieve a dispenser 
                of the requirement under this paragraph to 
                respond to a verification request submitted by 
                means other than a secure electronic database.
  (e) Repackager Requirements.--
          (1) Prescription drug product tracing.--
                  (A) In general.--Beginning not later than 
                April 1, 2015, with respect to a prescription 
                drug product received by a repackager from a 
                wholesale distributor, and beginning not later 
                than January 1, 2015, with respect to any other 
                prescription drug product, a repackager shall--
                          (i) not accept ownership of a 
                        prescription drug product unless the 
                        previous owner, prior to, or at the 
                        time of, the transaction, provides 
                        transaction history and a transaction 
                        statement for the prescription drug 
                        product;
                          (ii) prior to, or at the time of, 
                        each transaction in which the 
                        repackager transfers ownership of a 
                        prescription drug product, provide the 
                        subsequent owner with transaction 
                        history and a transaction statement;
                          (iii) maintain the transaction 
                        information for each transaction 
                        described in clause (i) or (ii) for not 
                        less than 3 years after the 
                        transaction; and
                          (iv) maintain records that allow the 
                        repackager to associate the 
                        prescription drug product identifier 
                        the repackager affixes or imprints with 
                        the prescription drug product 
                        identifier assigned by the original 
                        manufacturer of the prescription drug 
                        product.
                  (B) Nonsaleable returns.--Notwithstanding 
                subparagraph (A)(ii), a repackager may return 
                prescription drug product to the trading 
                partner from whom the repackager obtained the 
                prescription drug product without providing the 
                information required under such subparagraph.
                  (C) Requests for information.--Upon a request 
                by the Secretary or other appropriate Federal 
                or State official, in the event of a recall or 
                for the purpose of investigating a suspect 
                prescription drug product or an illegitimate 
                prescription drug product, a repackager shall, 
                not later than 2 business days after receiving 
                the request or in such other reasonable time as 
                determined by the Secretary, provide the 
                applicable transaction history and transaction 
                statement for the prescription drug product.
          (2) Prescription drug product identifier.--Beginning 
        not later than 6 years after the date of the enactment 
        of the Safeguarding America's Pharmaceuticals Act of 
        2013, a repackager--
                  (A) shall affix or imprint a prescription 
                drug product identifier to each package and 
                homogenous case of prescription drug product 
                intended to be introduced in a transaction;
                  (B) shall maintain the prescription drug 
                product identifier for such prescription drug 
                product for not less than 3 years after the 
                date of the transaction; and
                  (C) may engage in transactions involving a 
                prescription drug product only if such 
                prescription drug product is encoded with a 
                prescription drug product identifier except as 
                provided in subsection (a)(4).
          (3) Authorized trading partners.--Beginning on 
        January 1, 2015, a repackager shall ensure that each of 
        its trading partners is authorized.
          (4) Verification.--Beginning not later than January 
        1, 2015, a repackager shall implement systems to enable 
        the repackager to comply with the following 
        requirements:
                  (A) Suspect prescription drug product.--
                          (i) In general.--Upon making a 
                        determination that a prescription drug 
                        product in the possession or control of 
                        the repackager is a suspect 
                        prescription drug product, or upon 
                        receiving a request for verification 
                        from the Secretary that a prescription 
                        drug product within the possession or 
                        control of a repackager is a suspect 
                        prescription drug product, a repackager 
                        shall promptly conduct an investigation 
                        to determine whether the prescription 
                        drug product is an illegitimate 
                        prescription drug product, including--
                                  (I) beginning not later than 
                                6 years after the date of the 
                                enactment of the Safeguarding 
                                America's Pharmaceuticals Act 
                                of 2013, verifying the 
                                prescription drug product at 
                                the package level;
                                  (II) validating any 
                                applicable transaction 
                                information in the possession 
                                of the repackager; and
                                  (III) otherwise investigating 
                                to determine whether the 
                                prescription drug product is an 
                                illegitimate prescription drug 
                                product.
                          (ii) Cleared prescription drug 
                        product.--If the repackager determines 
                        that a suspect prescription drug 
                        product is not an illegitimate 
                        prescription drug product, the 
                        repackager shall promptly notify the 
                        Secretary of such determination and 
                        such prescription drug product may be 
                        further distributed.
                          (iii) Records.--A repackager shall 
                        keep records of its investigation of a 
                        suspect prescription drug product for 
                        not less than 3 years after the 
                        conclusion of the investigation.
                  (B) Illegitimate prescription drug product.--
                          (i) In general.--Upon receiving 
                        notice that a manufacturer of a 
                        prescription drug product has 
                        determined that a prescription drug 
                        product in the possession or control of 
                        a repackager is an illegitimate 
                        prescription drug product, the 
                        repackager shall--
                                  (I) quarantine such 
                                prescription drug product 
                                within the possession or 
                                control of the repackager from 
                                prescription drug product 
                                intended for distribution; and
                                  (II) provide for the 
                                disposition of the illegitimate 
                                prescription drug product 
                                within the possession or 
                                control of the repackager.
                          (ii) Trading partner.--Upon 
                        determining that a prescription drug 
                        product in the possession or control of 
                        a trading partner is an illegitimate 
                        prescription drug product, the 
                        repackagers shall take reasonable steps 
                        to assist the trading partner to 
                        provide for the disposition of the 
                        illegitimate prescription drug product.
                          (iii) Making a notification.--Upon 
                        determining that a prescription drug 
                        product in the possession or control of 
                        the repackager is an illegitimate 
                        prescription drug product, the 
                        repackager shall notify the Secretary 
                        of such determination not later than 24 
                        hours after making such determination. 
                        The Secretary shall determine whether 
                        additional trading partner notification 
                        is appropriate.
                          (iv) Responding to a notification.--
                        Upon the receipt of a notification from 
                        the Secretary that a determination has 
                        been made that a prescription drug 
                        product is an illegitimate prescription 
                        drug product, a repackager shall--
                                  (I) identify all illegitimate 
                                prescription drug products that 
                                are subject to such 
                                notification and in the 
                                possession or control of the 
                                repackager, including any 
                                prescription drug product that 
                                is subsequently received; and
                                  (II) perform the activities 
                                described in clause (i).
                          (v) Records.--A repackager shall keep 
                        records of the disposition of an 
                        illegitimate prescription drug product 
                        for not less than 3 years after the 
                        conclusion of the disposition.
                  (C) Electronic database.--A repackager may 
                satisfy the requirements of this paragraph 
                through the use of a secure electronic database 
                developed and operated by the manufacturer or 
                another entity. The owner of such database 
                shall establish the requirements and processes 
                to respond to requests and may provide for data 
                access to other members of the pharmaceutical 
                distribution supply chain, as appropriate. The 
                development and operation of such a database 
                shall not relieve a repackager of the 
                requirement under this paragraph to respond to 
                a verification request submitted by means other 
                than a secure electronic database.
                  (D) Returned prescription drug product.--
                Beginning not later than 6 years after the date 
                of the enactment of the Safeguarding America's 
                Pharmaceuticals Act of 2013, upon receipt of a 
                returned prescription drug product that the 
                repackager intends to further distribute, 
                before further distributing such prescription 
                drug product, the repackager shall--
                          (i) verify the prescription drug 
                        product identifier for each sealed 
                        homogeneous case of such prescription 
                        drug product; or
                          (ii) if such prescription drug 
                        product is not in a sealed homogeneous 
                        case, verify the prescription drug 
                        product identifier on each package.
  (f) Third-Party Logistics Provider Requirements.--
          (1) Authorized trading partners.--Beginning on 
        January 1, 2015, a third-party logistics provider shall 
        ensure that each of its trading partners is authorized.
          (2) Verification.--Beginning not later than January 
        1, 2015, a third-party logistics provider shall 
        implement systems to enable the third-party logistics 
        provider to comply with the following requirements:
                  (A) Suspect prescription drug product.--
                          (i) In general.--Upon making a 
                        determination that a prescription drug 
                        product in the possession or control of 
                        a third-party logistics provider is a 
                        suspect prescription drug product, a 
                        third-party logistics provider shall 
                        promptly notify the owner of such 
                        prescription drug product of the need 
                        to conduct an investigation to 
                        determine whether the prescription drug 
                        product is an illegitimate prescription 
                        drug product.
                          (ii) Cleared prescription drug 
                        product.--If the owner of the 
                        prescription drug product notifies the 
                        third-party logistics provider of the 
                        determination that a suspect 
                        prescription drug product is not an 
                        illegitimate prescription drug product, 
                        such prescription drug product may be 
                        further distributed.
                          (iii) Records.--A third-party 
                        logistics provider shall keep records 
                        of the activities described in clauses 
                        (i) and (ii) with respect to a suspect 
                        prescription drug product for not less 
                        than 3 years after the conclusion of 
                        the investigation.
                  (B) Illegitimate prescription drug product.--
                          (i) In general.--Upon receiving 
                        notice that a manufacturer of a 
                        prescription drug product has 
                        determined that a prescription drug 
                        product in the possession or control of 
                        a third-party logistics provider is an 
                        illegitimate prescription drug product, 
                        the third-party logistics provider 
                        shall--
                                  (I) quarantine such 
                                prescription drug product 
                                within the possession or 
                                control of the third-party 
                                logistics provider from 
                                prescription drug product 
                                intended for distribution;
                                  (II) promptly notify the 
                                owner of such prescription drug 
                                product of the need to provide 
                                for the disposition of such 
                                prescription drug product; and
                                  (III) promptly transfer 
                                possession of the prescription 
                                drug product to the owner of 
                                such prescription drug product 
                                to provide for the disposition 
                                of the prescription drug 
                                product.
                          (ii) Making a notification.--Upon 
                        determining that a prescription drug 
                        product in the possession or control of 
                        the third-party logistics provider is 
                        an illegitimate prescription drug 
                        product, the third-party logistics 
                        provider shall notify the Secretary not 
                        later than 24 hours after making such 
                        determination. The Secretary shall 
                        determine whether additional trading 
                        partner notification is appropriate.
                          (iii) Responding to a notification.--
                        Upon the receipt of a notification from 
                        the Secretary, a third-party logistics 
                        provider shall--
                                  (I) identify all illegitimate 
                                prescription drug product 
                                subject to such notification 
                                that is in the possession or 
                                control of the third-party 
                                logistics provider, including 
                                any prescription drug product 
                                that is subsequently received; 
                                and
                                  (II) perform the activities 
                                described in clause (i).
                          (iv) Records.--A third-party 
                        logistics provider shall keep records 
                        of the activities described in clauses 
                        (i) and (ii) with respect to an 
                        illegitimate prescription drug product 
                        for not less than 3 years after the 
                        conclusion of the disposition.
  (g) Drop Shipments.--This section does not apply to any 
entity, notwithstanding its status as a wholesale distributor 
or repackager, or other status that is not involved in the 
physical handling, distribution, or storage of a prescription 
drug product. For purposes of this subsection, facilitating the 
distribution of a prescription drug product by providing 
various administrative services, including processing of orders 
and payments, shall not, by itself, be construed as being 
involved in the handling, distribution, or storage of a 
prescription drug product.

SEC. 583. NATIONAL STANDARDS FOR WHOLESALE DISTRIBUTORS.

  (a) Standards.--
          (1) In general.--The Secretary shall establish, by 
        regulation, standards for the licensing of persons that 
        make wholesale distributions.
          (2) Requirements.--The standards under paragraph (1) 
        shall, with respect to wholesale distributions, include 
        requirements for--
                  (A) the storage and handling of drugs subject 
                to section 503(b)(1), including facility 
                requirements;
                  (B) the establishment and maintenance of 
                records of the distributions of such drugs;
                  (C) the furnishing of a bond or other 
                equivalent means of security in accordance with 
                paragraph (3);
                  (D) mandatory background checks and 
                fingerprinting of facility managers or 
                designated representatives;
                  (E) the establishment and implementation of 
                qualifications for key personnel;
                  (F) the mandatory physical inspection of any 
                facility to be used in wholesale distribution 
                within a reasonable timeframe from the initial 
                application for licensure of the wholesale 
                distributor; and
                  (G) in accordance with paragraph (5), the 
                prohibition of certain persons from engaging in 
                wholesale distribution.
          (3) Bond or other security.--The requirements under 
        paragraph (2)(C) shall provide for the following:
                  (A) An applicant that is not a government-
                owned-and-operated wholesale distributor, for 
                the issuance or renewal of a wholesale 
                distributor license, shall submit a surety bond 
                of $100,000 or other equivalent means of 
                security acceptable to the applicable licensing 
                authority.
                  (B) For purposes of subparagraph (A), the 
                applicable licensing authority may accept a 
                surety bond less than $100,000 if the annual 
                gross receipts of the previous tax year for the 
                wholesale distributor is $10,000,000 or less, 
                in which case the surety bond may not be less 
                than $25,000.
                  (C) If a wholesale distributor can provide 
                evidence that it possesses the required bond in 
                a State, the requirement for a bond in another 
                State is waived.
          (4) Inspections.--To satisfy the inspection 
        requirement under paragraph (2)(F), the Secretary may 
        conduct the inspection, or may accept an inspection 
        by--
                  (A) the government of the State in which the 
                facility is located; or
                  (B) a third-party accreditation or inspection 
                service approved by the Secretary.
          (5) Prohibited persons.--The requirements under 
        paragraph (2) shall include requirements to prohibit a 
        person from receiving or maintaining licensure for 
        wholesale distribution if the person--
                  (A) has been convicted of any felony for 
                conduct relating to wholesale distribution; any 
                felony violation of section 301(i) or 301(k); 
                or any felony violation of section 1365 of 
                title 18, United States Code, relating to 
                prescription drug product tampering; or
                  (B) has engaged in a pattern of violating the 
                requirements of this section that presents a 
                threat of serious adverse health consequences 
                or death to humans.
  (b) Reporting by Licensed Wholesale Distributors.--
          (1) Annual report.--Beginning not later than 1 year 
        after the date of the enactment of this section, each 
        person engaged in wholesale distribution in interstate 
        commerce shall submit on an annual basis, and update as 
        necessary, a report to the Secretary including--
                  (A) the wholesale distributor's name;
                  (B) the wholesale distributor's address;
                  (C) a listing of each State in which the 
                wholesale distributor is licensed for wholesale 
                distribution; and
                  (D) any disciplinary actions taken by a 
                State, the Federal Government, or a foreign 
                government during the reporting period against 
                the wholesale distributor.
          (2) Posting on internet.--The Secretary shall post on 
        the public Internet Website of the Food and Drug 
        Administration the name of each wholesale distributor, 
        and the State in which each such distributor is 
        licensed, based on reports under paragraph (1).
  (c) Preservation of State Authority.--This subchapter does 
not prohibit a State from--
          (1) licensing wholesale distributors for the conduct 
        of wholesale distribution activities in the State in 
        accordance with this subchapter; and
          (2) collecting fees from wholesale distributors in 
        connection with such licensing,
so long as the State does not require such licensure to the 
extent to which an entity is engaged in third-party logistics 
provider activities.
  (d) Definition.--In this section, the term ``wholesale 
distribution'' means the distribution of a drug subject to 
section 503(b)(1) to a person other than a consumer or patient, 
but does not include--
          (1) intracompany distribution of any drug between 
        members of an affiliated group (as defined in section 
        1504(a) of the Internal Revenue Code of 1986);
          (2) the distribution of a drug, or an offer to 
        distribute a drug among hospitals or other health care 
        entities which are under common control;
          (3) the distribution of a drug or an offer to 
        distribute a drug for emergency medical reasons, 
        including a public health emergency declaration 
        pursuant to section 319 of the Public Health Service 
        Act, except that a drug shortage not caused by a public 
        health emergency shall not constitute such an emergency 
        medical reason;
          (4) dispensing of a drug pursuant to a valid 
        prescription executed in accordance with subsection 
        503(b)(1);
          (5) the distribution of minimal quantities of drug by 
        a licensed retail pharmacy to a licensed practitioner 
        for office use;
          (6) the distribution of a drug or an offer to 
        distribute a drug by a charitable organization to a 
        nonprofit affiliate of the organization to the extent 
        otherwise permitted by law;
          (7) the purchase or other acquisition by a dispenser, 
        hospital, or other health care entity of a drug for use 
        by such dispenser, hospital, or other health care 
        entity;
          (8) the distribution of a drug by the manufacturer of 
        such drug;
          (9) the receipt or transfer of a drug by an 
        authorized third-party logistics provider provided that 
        such third-party logistics provider does not take 
        ownership of the drug;
          (10) the transport of a drug by a common carrier, 
        provided that the common carrier does not take 
        ownership of the drug;
          (11) the distribution of a drug, or an offer to 
        distribute a drug, by an authorized repackager that has 
        taken ownership of the drug and repacked it in 
        accordance with section 582(e);
          (12) saleable drug returns when conducted by a 
        dispenser in accordance with section 203.23 of title 
        21, Code of Federal Regulations (or any successor 
        regulation);
          (13) the distribution of a combination prescription 
        drug product described in section 581(20)(B)(xiii);
          (14) the distribution of a medical convenience kit 
        described in section 581(21)(B)(xiv);
          (15) the distribution of an intravenous drug that, by 
        its formulation, is intended for the replenishment of 
        fluids and electrolytes (such as sodium, chloride, and 
        potassium) or calories (such as dextrose and amino 
        acids);
          (16) the distribution of an intravenous drug used to 
        maintain the equilibrium of water and minerals in the 
        body, such as dialysis solutions;
          (17) the distribution of a drug that is intended for 
        irrigation or reconstitution, or sterile water, whether 
        intended for such purposes or for injection;
          (18) the distribution of compressed medical gas (as 
        defined in section 581(21)(C));
          (19) facilitating the distribution of a prescription 
        drug product by providing administrative services, such 
        as processing of orders and payments, without physical 
        handling, distribution, or storage of a prescription 
        drug product; or
          (20)(A) the distribution of a product by a dispenser, 
        or a wholesale distributor acting at the direction of 
        the dispenser, to a repackager registered under section 
        510 for the purpose of repackaging the drug for use by 
        that dispenser or another health care entity that is 
        under the dispenser's ownership or control, so long as 
        the dispenser retains ownership of the prescription 
        drug product; and
          (B) the saleable or nonsaleable return by such 
        repackager of such prescription drug product.
  (e) Effective Date.--The standards required by subsection (a) 
shall take effect not later than 2 years after the date of the 
enactment of this section. The Secretary shall issue the 
regulations required by subsection (a) not later than 1 year 
after the date of the enactment of this Act.

SEC. 584. NATIONAL LICENSURE STANDARDS FOR THIRD-PARTY LOGISTICS 
                    PROVIDERS.

  (a) License Requirement.--No facility may engage in the 
activities of a third-party logistics provider in any State 
unless--
          (1) the facility is licensed--
                  (A) by the State from which the drug is 
                distributed by the third-party logistics 
                provider in accordance with a qualified 
                licensing program, if the State has such a 
                program; or
                  (B) by the Secretary under this section, if 
                the State from which the drug is distributed 
                does not have such a program; and
          (2) if the drug is distributed interstate and the 
        facility is not licensed by the Secretary under 
        paragraph (1)(B), registers with the State into which 
        the drug is distributed if such State requires such 
        registration.
  (b) Reporting by Licensed Third-Party Logistics Providers.--
          (1) Annual report.--Beginning not later than 1 year 
        after the date of the enactment of this section, each 
        facility engaged in the activities of a third-party 
        logistics provider shall submit on an annual basis, and 
        update as necessary, a report to the Secretary 
        including--
                  (A) the facility's name;
                  (B) the facility's address;
                  (C) a listing of each jurisdiction (whether 
                State or Federal) in which the facility is 
                licensed for third-party logistics provider 
                activities; and
                  (D) any disciplinary actions taken by a State 
                or Federal licensing authority during the 
                reporting period against the facility.
          (2) Posting on internet.--The Secretary shall post on 
        the public Internet Website of the Food and Drug 
        Administration the name of each third-party logistics 
        provider, and each jurisdiction (whether State or 
        Federal) in which the provider is licensed, based on 
        reports under paragraph (1).
  (c) Preservation of State Authority.--This subchapter does 
not prohibit a State from--
          (1) licensing third-party logistic providers for the 
        conduct of third-party logistics provider activities in 
        the State in accordance with this subchapter; and
          (2) collecting fees from third-party logistics 
        providers in connection with such licensing,
so long as the State does not require such licensure to the 
extent to which an entity is engaged in wholesale distribution.
  (d) Costs.--
          (1) Authorized licensure fees.--In the case of a 
        facility engaging in the activities of a third-party 
        logistics provider licensed by the Secretary under this 
        section, the Secretary may assess and collect a 
        reasonable fee in an amount equal to the costs to the 
        Federal Government of establishing and administering 
        the licensure program established, and conducting 
        period inspections, under this section.
          (2) Adjustment.--The Secretary shall adjust the 
        amount of the fee under paragraph (1) on an annual 
        basis, if necessary, to generate an amount of revenue 
        equal to the costs referred to in such paragraph.
          (3) Availability.--Fees assessed and collected under 
        this subsection shall be available for obligation only 
        to the extent and in the amount provided in advance in 
        appropriations Acts. Such fees shall remain available 
        until expended.
  (e) License Regulations.--
          (1) In general.--The Secretary shall establish, by 
        regulation, standards, terms, and conditions for 
        licensing persons to engage in third-party logistics 
        provider activities.
          (2) Content.--The regulations under paragraph (1) 
        shall--
                  (A) include standards relating to eligibility 
                for, and revocation and reissuance of, 
                licenses;
                  (B) establish a process by which the 
                applicable licensing authority will, upon 
                request by a third-party logistics provider 
                that is accredited by a third-party 
                accreditation program approved by the 
                Secretary, issue a license to the provider;
                  (C) establish a process by which the 
                Secretary shall issue a license to a third-
                party logistics provider if the Secretary is 
                not able to approve a third-party accreditation 
                program because no such program meets the 
                Secretary's requirements necessary for approval 
                of such a third-party accreditation program;
                  (D) require that the third-party logistics 
                provider comply with storage practices, as 
                determined by the Secretary, at the provider's 
                facilities, including--
                          (i) maintaining access to warehouse 
                        space of suitable size to facilitate 
                        safe operations, including a suitable 
                        area to quarantine suspect prescription 
                        drug product;
                          (ii) maintaining adequate security; 
                        and
                          (iii) having written policies and 
                        procedures to--
                                  (I) address receipt, 
                                security, storage, inventory, 
                                shipment, and distribution of a 
                                prescription drug product;
                                  (II) identify, record, and 
                                report confirmed losses or 
                                thefts in the United States;
                                  (III) correct errors and 
                                inaccuracies in inventories;
                                  (IV) provide support for 
                                manufacturer recalls;
                                  (V) prepare for, protect 
                                against, and address any 
                                reasonably foreseeable crisis 
                                that affects security or 
                                operation at the facility, such 
                                as a strike, fire, or flood;
                                  (VI) ensure that any expired 
                                prescription drug product is 
                                segregated from other 
                                prescription drug products and 
                                returned to the manufacturer or 
                                repackager or destroyed;
                                  (VII) maintain the capability 
                                to electronically trace the 
                                receipt and outbound 
                                distribution of a prescription 
                                drug product, and supplies and 
                                records of inventory; and
                                  (VIII) quarantine or destroy 
                                a suspect prescription drug 
                                product if directed to do so by 
                                the respective manufacturer, 
                                wholesale distributor, 
                                dispenser, or an authorized 
                                government agency;
                  (E) provide for periodic inspection, as 
                determined by the Secretary, of such facility 
                warehouse space to ensure compliance with this 
                section;
                  (F) prohibit a facility from having as a 
                manager or designated representative anyone 
                convicted of any felony violation of section 
                301(i) or 301(k) or any felony violation of 
                section 1365 of title 18, United States Code, 
                relating to prescription drug product 
                tampering;
                  (G) perform mandatory background checks of 
                the provider's facility managers or designated 
                representatives of such managers;
                  (H) require a third-party logistics provider 
                to provide to the applicable licensing 
                authority, upon the authority's request, a list 
                of all prescription drug product manufacturers, 
                wholesale distributors, and dispensers for whom 
                the third-party logistics provider provides 
                services at the provider's facilities; and
                  (I) include procedures under which any third-
                party logistics provider license--
                          (i) will expire on the date that is 3 
                        years after issuance of the license; 
                        and
                          (ii) may be renewed for additional 3-
                        year periods.
  (f) Validity of License.--A license issued under this section 
shall remain valid as long as such third-party logistics 
provider remains accredited by the Secretary, subject to 
renewal under subsection (d). If the Secretary finds that the 
third-party accreditation program demonstrates that all 
applicable requirements for licensure under this section are 
met, the Secretary shall issue a license under this section to 
a third-party logistics provider receiving accreditation.
  (g) Qualified Licensing Program Defined.--In this section, 
the term ``qualified licensing program'' means a program 
meeting the requirements of this section and the regulations 
thereunder.
  (h) Effective Date.--The requirements of this section shall 
take effect not later than 1 year after the date of the 
enactment of this section. The Secretary shall issue the 
regulations required by subsection (d) not later than 180 days 
after the date of the enactment of this section.

SEC. 585. UNIFORM NATIONAL POLICY.

  (a) Preemption of State Prescription Drug Product Tracing and 
other Requirements.--Beginning on the date of the enactment of 
the Safeguarding America's Pharmaceuticals Act of 2013, no 
State or political subdivision of a State may establish or 
continue in effect any requirements for tracing drugs through 
the distribution system (including any requirements with 
respect to paper or electronic pedigrees, track and trace, 
statements of distribution history, transaction history, or 
transaction statements, or verification, investigation, 
disposition, alerts, or recordkeeping relating to the 
pharmaceutical distribution supply chain system) that--
          (1) are inconsistent with, more stringent than, or in 
        addition to any requirements applicable under this Act; 
        or
          (2) are inconsistent with any applicable waiver, 
        exception, or exemption issued by the Secretary under 
        section 582(a).
  (b) Standards or Licensure.--
          (1) In general.--Beginning on the date of the 
        enactment of Safeguarding America's Pharmaceuticals Act 
        of 2013, no State or political subdivision of a State 
        may establish or continue any standards, requirements, 
        or regulations with respect to wholesale drug 
        distributor or third-party logistics provider licensure 
        which are inconsistent with, less stringent than, in 
        addition to, or more stringent than, the standards and 
        requirements under this Act.
          (2) Licensing fees.--Paragraph (1) does not affect 
        the authority of a State to collect fees from wholesale 
        drug distributors or third-party logistics providers in 
        connection with State licensing under section 583 or 
        584 pursuant to a licensing program meeting the 
        requirements of such sections.
          (3) Enforcement, suspension, and revocation of 
        licenses.--Notwithstanding paragraph (1), a State--
                  (A) may take administrative action, including 
                fines, to enforce a licensure requirement 
                promulgated by the State in accordance with 
                this Act;
                  (B) may provide for the suspension or 
                revocation of licenses issued by the State for 
                violations of the laws of such State;
                  (C) upon conviction of a person for a 
                violation of Federal, State, or local 
                controlled substance laws or regulations, may 
                provide for fines, imprisonment, or civil 
                penalties; and
                  (D) may regulate activities of entities 
                licensed pursuant to section 583 or 584 in a 
                manner that is consistent with the provisions 
                of this subchapter.

           *       *       *       *       *       *       *


CHAPTER VIII--IMPORTS AND EXPORTS

           *       *       *       *       *       *       *


SEC. 804. IMPORTATION OF PRESCRIPTION DRUGS.

  (a) Definitions.--In this section:
          (1) * * *

           *       *       *       *       *       *       *

          (5) Wholesaler.--
                  (A) In general.--The term ``wholesaler'' 
                means a person licensed as a wholesaler or 
                distributor of prescription drugs in the United 
                States under section [503(e)(2)(A)] 583(a).

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

    We, the undersigned members of the Committee on Energy and 
Commerce, oppose passage of H.R. 1919, the Safeguarding 
America's Pharmaceuticals Act of 2013. Accordingly, we submit 
the following comments to express our concerns about this 
inadequate legislation.

                              INTRODUCTION

    Although we share the goals of the supporters of H.R. 
1919--to enact legislation that will better secure our drug 
supply chain--we do not believe that H.R. 1919 will ultimately 
accomplish that goal. H.R. 1919 does not provide any assurance 
that an effective system for tracking and tracing drugs through 
the supply chain will ultimately be put into place. Instead, 
the bill requires only that Food and Drug Administration (FDA) 
issue proposed regulations designed to establish such a 
system--these regulations may never be issued, become final, or 
go into effect. We believe that any legislation on this issue 
should give Americans certainty that an effective system will 
be put into place.

                        BACKGROUND AND OVERVIEW

    There is an increasing prevalence of falsified and 
substandard drugs in the legitimate drug supply, both in the 
U.S. and the world over.\1\ These drugs pose a public health 
threat in a variety of ways. Some may contain toxic 
ingredients, while others may simply not work.\2\ Poor quality 
medicines cause treatment failures, but in many cases, 
physicians may not suspect medicines as a cause of such 
failure.\3\
---------------------------------------------------------------------------
    \1\G. J. Buckley and L. O. Goslin, Countering the Problem of 
Falsified and Substandard Drugs. Institute of Medicine (Feb. 13, 2013) 
(online at http://www.iom.edu/Reports/2013/Countering-the-Problem-of-
Falsified-and-Substandard-Drugs.aspx).
    \2\Id.
    \3\Id.
---------------------------------------------------------------------------
    In recent years, there have been several high-profile 
instances of counterfeit and substandard medicines entering the 
supply chain. For example:
           In July 2012, federal prosecutors in New 
        York charged 48 people in a fraud involving HIV 
        medications purchased from Medicaid recipients and sold 
        to other patients for cash.\4\
---------------------------------------------------------------------------
    \4\C. Boyette, New York Authorities Charge 48 in Massive Medicaid 
Fraud, CNN (July 18, 2012) (online at http://www.cnn.com/2012/07/18/
justice/new-york-drug-scheme).
---------------------------------------------------------------------------
           Between 2012 and 2013, FDA warned about 
        three instances of counterfeit and substandard versions 
        of the cancer drug, Avastin, circulating in the supply 
        chain.\5\
---------------------------------------------------------------------------
    \5\FDA Warns of New Fake Batch of Cancer Drug Avastin, Associated 
Press (Feb. 6, 2013) (online at http://news.yahoo.com/fda-warns-fake-
batch-cancer-drug-avastin09155524363-finance.html).
---------------------------------------------------------------------------
           In 2009, FDA reported that 129,000 vials of 
        insulin were stolen and were being sold in the U.S. 
        market. FDA indicated that the vials may not have been 
        stored and handled properly which posed a threat for 
        patients who might use them.\6\
---------------------------------------------------------------------------
    \6\Food and Drug Administration, FDA Advisory About Levemir Insulin 
(June 18, 2009) (online at http://www.fda.gov/ForConsumers/
ConsumerUpdates/ucm167600.htm).
---------------------------------------------------------------------------
           In 2010, $75 million worth of drugs were 
        stolen from an Eli Lilly and Company warehouse in 
        Connecticut.\7\
---------------------------------------------------------------------------
    \7\Lilly Drugs Stolen in Warehouse Heist, Wall Street Journal (Mar. 
17, 2010) (online at http://online.wsj.com/article/
SB10001424052748704688604575125522684707974.html).
---------------------------------------------------------------------------
           In 2003, counterfeit Lipitor from Central 
        America was sold into the U.S. supply chain.\8\
---------------------------------------------------------------------------
    \8\Pew Health Group, After Heparin: Protecting Consumers From the 
Risks of Substandard and Counterfeit Drugs, 65 (online at: http://
www.pewhealth.org/uploadedFiles/PHG/Content_ Level_Pages/Reports/
Pew_Heparin_Final_.pdf).
---------------------------------------------------------------------------
           In 2001, counterfeit Serostim, which is a 
        human growth hormone used to treat AIDS-related 
        wasting, was found in at least seven states and passed 
        through multiple wholesalers.\9\
---------------------------------------------------------------------------
    \9\Pew Health Group, After Heparin: Protecting Consumers From the 
Risks of Substandard and Counterfeit Drugs, 64 (online at http://
www.pewhealth.org/uploadedFiles/PHG/Content_ Level_Pages/Reports/
Pew_Heparin_Final_.pdf).
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    There is widespread agreement that, if the goal is to 
protect American patients from substandard and falsified 
medicines, the best way to protect the supply chain is to 
establish a unit-level, interoperable system that involves all 
members of the supply chain. H.R. 1919 fails to assure the 
establishment of this system and falls short in other 
significant ways of protecting patients from the entry of 
unsafe and substandard drugs into the supply chain. The 
following describes those shortcomings:
A. Section 2 (Pharmaceutical Distribution Supply Chain) Fails To 
        Provide Adequate Assurance That Illegitimate Product Will Not 
        Enter the Supply Chain Through Returns Exemptions
    One issue that is reflected in Section 2 is the problem of 
how to handle ``returns,'' which generally refers to entities 
in the supply chain having the ability to return unused stock 
to the previous seller from which they obtained the product. 
Returns create a significant problem because they create the 
potential for entry of illegitimate product. For example, 
pharmacies could obtain counterfeit or substandard medicines 
and sell them back to the wholesaler at a profit, and then the 
wholesaler could redistribute that product into the supply 
chain.
    H.R. 1919 provides that upon redistributing returned 
product, the wholesaler must include a transaction history 
(which details the drug's trip through the supply chain) that 
begins with that wholesaler.\10\ In other words, upon 
redistributing the product, the pedigree starts anew with the 
wholesaler.
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    \10\See H.R. 1919 at 35, lines 18-36, line 5.
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    We support an alternative approach that would prohibit 
wholesalers from accepting product from dispensers unless the 
wholesaler could associate the returned product with the 
transaction history and information linked to that product. 
This requirement would ensure that the wholesaler will verify 
that the returned product from the dispenser was indeed the 
product that wholesaler sold to that dispenser. As a result, 
the likelihood of counterfeit or substandard product entering 
the supply chain is diminished.
B. Section 3 (Enhanced Drug Distribution Security) Does Not Mandate the 
        Establishment of an Electronic, Interoperable Unit-Level System
    In general, section 2 of H.R. 1919 sets up a so-called 
``phase I'' in which certain aspects of an electronic, 
interoperable unit-level system are gradually put into 
place.\11\ Section 3 represents the so-called ``phase II'' in 
which the goal is to establish this system. However, for the 
following reasons, there is a concern that this goal will not 
fully be realized based on the current language of the bill.
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    \11\See H.R. 1919, at 3, line 8.
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    H.R. 1919 would require FDA to issue proposed regulations, 
no sooner than January 1, 2027 and no later than March 1, 
2027.\12\ These proposed regulations would establish additional 
requirements ``to prevent a suspect product, illegitimate 
product, or a product that is counterfeit, stolen, diverted, or 
otherwise unfit for distribution from entering into or being 
further distributed in the supply chain.''\13\ Such 
requirements would include those ``related to the use of 
interoperable electronic systems and technologies for enhanced 
tracing of prescription drug product at the package level'' 
among other things.\14\
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    \12\See H.R. 1919, at 71, line 1.
    \13\See H.R. 1919, at 71, lines 7-12.
    \14\See H.R. 1919, at 71, lines 13-16.
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    However, H.R. 1919 does not set a deadline for the issuance 
of final regulations. It also does not explicitly require that 
the proposed regulations shall establish requirements for the 
implementation of an electronic, unit-level interoperable 
system. Further, it mandates that, if and when final 
regulations are issued, there is an additional two year delay 
in the effective date of those regulations.\15\ Thus, not only 
is the timeline for issuing proposed regulations inordinately 
long, but there is no assurance that final regulations will 
ever be issued. When--or if--final regulations are ever issued, 
there is even more delay. This kind of delay and uncertainty 
about whether we will ever get to the best system for 
protecting consumers is unacceptable to us, and should be 
unacceptable to all members.
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    \15\See H.R. 1919, at 75, lines 12-14.
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    We support an alternative approach that would set a 
reasonable date-certain for the establishment of a unit-level 
interoperable tracking and tracing system that includes all 
entities in the supply chain. This approach would also permit 
FDA to establish this system based on requirements set forth in 
the statute; it would not be contingent upon the issuance of 
FDA regulations. We assume and expect, however, that even 
though this approach would reflect a self-effectuating system 
based on the statutory requirements, FDA would still issue 
guidance to industry stakeholders in the form of regulations 
and guidance documents.
C. Section 4 (National Standards for Wholesale Distributors) Will 
        Prevent States From Responding to the Particular Needs of Their 
        Own States
    H.R. 1919 requires FDA to set national standards for the 
licensing of wholesale distributors\16\ and preempts all state 
laws governing such licensure that are ``inconsistent with, 
less stringent than, in addition to, or more stringent than'' 
the standard that FDA will set.\17\ In other words, the draft 
would make the FDA standards both a ``ceiling and a floor'' for 
state licensing laws. This can be a concern for states that 
have a high number of wholesalers and, consequently, strong 
licensing schemes. We support an alternative approach of 
requiring FDA to set standards, but permitting states to go 
beyond those standards when appropriate.
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    \16\See H.R. 1919, at 76, line 6.
    \17\See H.R. 1919, at 94, line 16-17.
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D. Section 7 (Uniform National Policy) Immediately Preempts Important 
        Safeguards Without Requiring an Acceptable Substitute
    On the date of enactment, H.R. 1919 would preempt all state 
requirements for tracing drugs through the distribution system, 
as well as current federal requirements that were set forth in 
Section 503(e) of the Federal Food, Drug, and Cosmetic Act, as 
part of the Prescription Drug Marketing Act of 1987. For 
example, Florida requires that a pedigree identifying each 
previous sale of a drug back to the manufacturer be passed with 
most drug transactions. Under H.R. 1919, there would be no 
federal requirement to pass transaction information and history 
until January 1, 2015 for manufacturers and repackagers,\18\ 
April 1, 2015 for wholesalers,\19\ and July 1, 2015 for 
dispensers.\20\ Thus, state and federal requirements would be 
preempted before any federal requirements to pass transaction 
information and history have kicked in. Assuming H.R. 1919 were 
to be enacted during 2013, this would leave a significant gap 
in the current level of information about a drug's path through 
the supply chain--information that is important to law 
enforcement efforts to stop the entry of counterfeit and 
substandard drugs into the supply chain.
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    \18\See H.R. 1919, at 25, lines 21-23; 50, lines 16-51, line 20.
    \19\See H.R. 1919, at 33, line 1-35, line 17.
    \20\See H.R. 1919, at 42, lines 20-43, line 16.
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E. FDA Technical Assistance Was Not Addressed in H.R. 1919
    FDA provided extensive technical assistance raising 
additional concerns about the workability of H.R. 1919 and 
describing various unintended consequences that could pose 
patient safety concerns. However, H.R. 1919 failed to 
incorporate much of this technical assistance. We are concerned 
that the expertise of the regulatory agency that would 
ultimately be tasked with implementing this legislation was not 
taken into account.
    In sum, we believe that H.R. 1919 will fail to meet the 
goal of better securing our drug supply chain and protecting 
Americans from unsafe and substandard drugs. As it moves 
through the legislative process, significant improvements to 
this legislation will be necessary in order for it to meet this 
goal.

                                   Henry A. Waxman,
                                           Ranking Member, Committee on 
                                               Energy and Commerce.
                                   Frank Pallone, Jr.,
                                           Ranking Member, Subcommittee 
                                               on Health, Committee on 
                                               Energy and Commerce.