(3) The notice will inform the applicant of its right to provide
additional information and request reconsideration of the denial by the
licensing authority within 14 calendar days of the date of the
licensing authority's written notice.
    (4) If no reconsideration is sought or if, upon reconsideration,
the licensing authority denies the applicant's request for licensure,
the licensing authority will provide the applicant written notice of
the denial and will provide the applicant notice of the opportunity to
request a hearing.
    (5) The applicant who wishes to request a hearing has 10 calendar
days after the date of the notice of denial to submit a written notice
of participation and request for a hearing. The applicant who fails to
submit a written notice of participation and request for a hearing
within 10 calendar days waives the opportunity for a hearing.
    (6) Parts 10 through 16 of this chapter apply to 3PL licenses
issued by the Food and Drug Administration under section 584 of the
Federal Food, Drug, and Cosmetic Act.
    (b) Suspension of license after notice and opportunity to request a
hearing. (1) The licensing authority may move to suspend a license if
the licensing authority has a reasonable belief that the licensee has
failed to comply with any of the standards for receiving and
maintaining licensure described in this subpart.
    (2) The licensing authority will provide written notice of intent
to suspend a 3PL license setting forth the grounds for the suspension
pursuant to this part, including what information would be required to
demonstrate or achieve compliance. The notice will inform the applicant
of its right to provide additional information, request reconsideration
of the suspension by the licensing authority, and demonstrate or
achieve compliance before suspension.
    (3) Each 3PL license holder has 30 calendar days from the date of
the notice of intent to suspend to present, in writing, comments and
information bearing on the initial decision.
    (4) If no comments or information are received within 30 calendar
days or if, upon reconsideration, the licensing authority believes the
3PL license should still be suspended, the licensing authority will
provide the 3PL a second written notice of the intent to suspend,
informing the 3PL of the opportunity to request a hearing on the
question of whether there are grounds for suspension.
    (5) The written notice will contain a statement that the 3PL will
be afforded an opportunity to request a hearing.
    (6) The 3PL must submit a written notice of participation and
request a hearing in writing within 10 calendar days after the date of
notice of the intent to suspend. A 3PL that fails to submit

a written notice of participation and request for hearing within 10
calendar days waives the opportunity for a hearing and the license will
be suspended.
    (7) Parts 10 through 16 of this chapter apply to 3PL licenses
issued by the Food and Drug Administration under section 584 of the
Federal Food, Drug, and Cosmetic Act.
    (8) If a 3PL's license is suspended and the 3PL does not
demonstrate or achieve compliance to the licensing authority's
satisfaction within the time period indicated in the notice of
suspension, the licensing authority will move to revoke the 3PL's
license.
    (c) Immediate suspension of license. (1) The licensing authority
may suspend a license effective immediately if the licensing authority
reasonably believes that the licensee has failed to comply with any of
the standards for receiving and maintaining licensure described in this
subpart and that the nature of the noncompliance at issue would
reasonably be expected to cause an imminent threat to public health.
    (2) The licensing authority will provide the 3PL with written
notice of immediate suspension of its license setting forth the grounds
for the immediate suspension pursuant to this part, including what
information would be required to demonstrate compliance, and the
opportunity to request a hearing within 10 calendar days of the 3PL's
request for such hearing.
    (3) The 3PL must submit a written notice of participation and
request a hearing in writing within 10 calendar days after the date of
the written notice of immediate suspension. A 3PL that fails to submit
a written notice of participation and request for hearing within 10
calendar days after the date of the written notice waives the
opportunity for a hearing.
    (4) Parts 10 through 16 of this chapter apply to 3PL licenses
issued by the Food and Drug Administration under section 584 of the
Federal Food, Drug, and Cosmetic Act.
    (5) If a 3PL's license is suspended and the 3PL does not
demonstrate or achieve compliance to the licensing authority's
satisfaction within the time period indicated in the notice of
suspension, the licensing authority will move to revoke the 3PL's
license.
    (d) Reinstatement of suspended licenses. The licensing authority
may reinstate a previously suspended license upon a 3PL's showing of
compliance with requirements in this part and upon such inspection and
examination as the licensing authority may require.
    (e) Revocation. (1) If compliance is not demonstrated or achieved
to the licensing authority's satisfaction within the time period
indicated in the notice of suspension, the licensing authority will
move to revoke the 3PL's license.
    (2) The licensing authority will notify the 3PL of the intent to
revoke the 3PL's license, setting forth the grounds for the revocation
and offering an opportunity to request a hearing on the proposed
revocation.
    (3) The written notice will contain a statement that the 3PL may
request a hearing.
    (4) The 3PL must submit a written notice of participation and
request a hearing within 10 calendar days after the date of the notice
of revocation. A 3PL that fails to submit a written notice of
participation and request for hearing within 10 calendar days waives
the opportunity for a hearing.
    (5) Parts 10 through 16 of this chapter apply to 3PL licenses
issued by the Food and Drug Administration under section 584 of the
Federal Food, Drug, and Cosmetic Act.
    (f) Nonrenewal. If a license is suspended and the 3PL does not
submit a renewal application by the date of expiration of the suspended
license, the license will be considered expired. A 3PL may not conduct
3PL activities with an expired license and must submit a new
application for licensure if it wishes to conduct 3PL activities.
    (g) Voluntary termination of licensure upon request by the 3PL. The
licensing authority will terminate a 3PL facility's license upon the
3PL's request, which includes a notice of intent to discontinue its 3PL
activities and waive opportunity for a hearing. A 3PL facility that
voluntarily terminates licensure must obtain a new license before
resuming 3PL activities.
    (1) If a 3PL facility that has had its license revoked wishes to
apply for a new license, that facility must submit a new license
application, which may include an inspection if required by the
licensing authority under Sec.  205.16.
    (2) [Reserved]

Sec.  205.10  Good storage practices for 3PL facilities.

    (a) A facility owned, rented, or leased by a 3PL for the purpose of
conducting 3PL activities must meet the storage practices for
facilities required in paragraphs (b) through (d) of this section.
    (b) A facility to which a 3PL license has been issued in the same
name and at the same address as another trading partner, such as a
wholesale distributor, must maintain separate systems and processes for
products that are specific to the 3PL.
    (c) A facility owned, leased, or rented by a 3PL in which 3PL
activities are conducted must have suitable storage practices in place
for such facility, as demonstrated by the following:
    (1) General requirements. The facility is:
    (i) Not a personal residence;
    (ii) Of a suitable size, construction, and configuration to ensure
proper storage and distribution of all products warehoused at the
facility, including lighting, ventilation, temperature, sanitation,
humidity, space, equipment, and secure conditions where products are
stored;
    (iii) Of a suitable size, construction, and configuration to
facilitate cleaning, maintenance, proper logistics, and distribution
operations, and to provide protection from intrusion; and
    (iv) Maintained in a clean and orderly condition, free from
infestation of any kind.
    (A) A cleaning program schedule must be maintained, documented, and
followed.
    (B) A pest control program, which is designed to ensure that the
facility is free from infestation, must be in place, and pest control
records must be kept.
    (2) Areas to handle separation of products that are unfit for
distribution. The facility has:
    (i) Clearly defined, designated areas separate from saleable
products to quarantine suspect product, illegitimate product, and other
products that are unfit for distribution until dispositioned.
    (ii) Clearly defined, designated areas to handle separation of
products that are returned, recalled, or expired.
    (iii) For returned or recalled products, clearly defined,
designated areas separate from saleable products to handle returned or
recalled product.
    (iv) For expired products, clearly defined, designated areas
separate from saleable products from which expired product may be
returned to the manufacturer or repackager or destroyed.
    (3) Security of premises. The facility is:
    (i) Designed so that designated areas of the facility where
products are held are accessible only to personnel, regardless of
employee or contractor status, position title, or ownership interest,
who possess appropriate and verifiable experience and training
necessary to safely and lawfully engage in 3PL activities; and
    (ii) Equipped with adequate security to protect from
vulnerabilities and potential breaches. Adequate security must include
precautions taken to ensure that:

    (A) The facility is secure from unauthorized entry;
    (B) Access from outside the premises is limited, well controlled,
and documented;
    (C) The outside perimeter of the premises is well lit;
    (D) The facility is equipped with an alarm system to detect and
notify appropriate personnel of entry after hours; and
    (E) The facility is equipped with a security system that provides
suitable protection against theft and diversion of products.
    (4) Facility assessments. Facility assessments, including
temperature mapping and other assessments designed to ensure products
are properly stored in accordance with their labeling, must be
regularly conducted and documented.
    (5) Equipment. Equipment must be utilized and maintained in good
repair and must be suitable for 3PL activities, as demonstrated by the
following:
    (i) The 3PL must be able to demonstrate that all equipment has been
calibrated, as applicable, and validated at regular intervals to
achieve the intended results accurately, consistently, and in a manner
that can be reproduced by qualified individuals following approved
procedures;
    (ii) The 3PL must use appropriate manual, electromechanical, or
electronic temperature and humidity recording equipment or logs to
document proper storage of products; and
    (iii) The monitoring equipment must alert appropriate personnel in
a timely manner of any deviations from the intended storage conditions.
    (d) In addition to the requirements set forth in this subpart,
products must be handled and stored in accordance with all applicable
Federal and State laws.

Sec.  205.11  Personnel requirements necessary for good storage
practices.

    (a) The 3PL must maintain a list of officers, directors, managers,
and designated representatives; a description of their duties; and a
summary of their qualifications. This list must be available for review
by the State or Federal licensing authority.
    (b) Qualifications for the 3PL's facility manager or designated
representative of such facility manager must include that the
individual:
    (1) Has the education, background, training, and experience
necessary to perform such individual's assigned functions;
    (2) Serves as the facility manager or designated representative of
such facility manager for only one facility at a time; and
    (3) Is actively involved in and responsible for managing the daily
operations of the 3PL facility.
    (c) The 3PL must provide the facility manager or designated
representative adequate authorities and resources to effectively manage
the 3PL's daily operations in accordance with the standards in this
part.
    (d) The facility manager or designated representative is
responsible for managing all the daily operations of the 3PL facility,
including those duties delegated to other personnel.
    (e) A 3PL is prohibited from obtaining or maintaining licensure if
the 3PL employs a facility manager or designated representative who has
been:
    (1) Convicted of any felony violation of section 301(i) or (k) of
the Federal Food, Drug, and Cosmetic Act; or
    (2) Convicted of any violation of 18 U.S.C. 1365, relating to
product tampering.
    (f) Licensure may also be denied when storage practices are not
sufficient to maintain adequate security because a facility manager or
designated representative of such facility manager has been:
    (1) Found to have delayed or otherwise impeded an inspection by the
Federal or State licensing authority or an approved third-party
inspector, or if an inspector, after reasonable efforts, was unable to
gain access to an establishment or a location to carry out the
inspection required under Sec.  205.16 as permitted by section 704(a)
of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 374(a));
    (2) Found to have omitted material information or furnished false
or fraudulent information in an application made in connection with the
distribution of prescription drugs; or
    (3) Subject to licensure suspension or revocation by Federal,
State, or local government for any license currently or previously held
by the applicant for the manufacture or distribution of any drugs,
including controlled substances.
    (g) Any facility manager or designated representative will be
subject to criminal background checks. The results of the background
checks must demonstrate no history of criminal convictions pursuant to
paragraph (e) of this section.

Sec.  205.12  Required written policies and procedures.

    (a) General requirements for written policies and procedures. Every
3PL must establish, maintain, and follow written policies and
procedures as described in this section and relevant to the scope of
their 3PL activities. The written policies and procedures must clearly
delineate the responsibilities of the 3PL and any contractors used to
fulfill any of the 3PL's duties. The written policies and procedures
must also describe a system by which the 3PL will monitor all processes
and, if deviations occur, document and investigate to determine the
root cause of the deviation in a timely manner. Such written policies
and procedures must be made available to the licensing authority upon
request, and the licensing authority may copy records to ensure the 3PL
is following written policies and procedures.
    (1) Written policies and procedures must include, but are not
limited to, the following:
    (i) Documentation pertaining to receipt, security, storage,
handling, inventory, shipment, and distribution of products, including
written policies and procedures for identifying, recording, and
reporting confirmed losses, thefts, diversions, and products unfit for
distribution; and
    (ii) Documentation pertaining to all policies, procedures,
instructions, contracts, data, inspection reports, and any other
documentation related to compliance with this part.
    (b) Personnel. The 3PL must establish, maintain, and follow written
policies and procedures that ensure the qualifications of personnel are
met, maintained, and documented as required in Sec.  205.11. These
written policies and procedures must be available for review by the
State or Federal licensing authority, as provided in Sec.  205.13.
    (c) Written policies and procedures. The 3PL must maintain written
policies and procedures to address receipt, security, storage,
inventory, shipment, and distribution of the product.
    (1) Receipt. The 3PL must establish, maintain, and follow written
policies and procedures providing for the inspection of all shipping
containers in accordance with the following standards:
    (i) Incoming shipments. Upon receipt, each shipping container must
be visually examined for identity and for conditions that would suggest
the product may be unfit for distribution.
    (ii) Outgoing shipments. Each outgoing shipment must be properly
inspected for identity of the product and to ensure that there is no
shipment of product that is unfit for distribution.
    (2) Security. The 3PL must establish, maintain, and follow written
policies and procedures that provide for the secured storage of
products and preserve the integrity of the 3PL's data and records.

    (3) Storage. The 3PL must establish, maintain, and follow written
policies and procedures that ensure products are stored at appropriate
temperatures and under appropriate conditions, in accordance with the
requirements in the products' labeling, to preserve their identity,
strength, quality, and purity.
    (4) Inventory. The 3PL must establish, maintain, and follow written
policies and procedures related to inventory controls that:
    (i) Ensure the facility's stock is inventoried regularly to protect
against diversion and against distribution of product that may be unfit
for distribution;
    (ii) Contain procedures to identify, investigate, document, and
correct stock errors, inaccuracies, and irregularities, including
product theft, loss, or diversion;
    (iii) Identify, record, and report confirmed product losses or
theft immediately to the owner of the products and relevant
authorities; and
    (iv) Ensure that the 3PL can trace the receipt and outbound
distribution of a product, as well as maintain supply and inventory
records.
    (5) Shipment. The 3PL must establish, maintain, and follow written
policies and procedures providing for the transportation of products in
accordance with the following standards:
    (i) Products must be transported in a manner that will:
    (A) Protect against breakage, contamination, adulteration, and
theft;
    (B) Prevent exposure to conditions that may compromise their
quality and integrity; and
    (C) Ensure that deviations from storage requirements during
transport are promptly identified, investigated, documented, and
reported to the trading partner from whom the product was received and
to the manufacturer to determine if further commercial distribution is
appropriate.
    (ii) A 3PL that outsources transportation of products to a
transportation provider, such as a common carrier, remains responsible
for compliance with this part while the products are in transit to the
intended trading partner. Arrangements for transportation by a
transportation provider must be documented and carried out in
accordance with the requirements in this section.
    (6) Distribution. The 3PL must establish, maintain, and follow
written policies and procedures related to the distribution of products
that:
    (i) Ensure products are distributed at appropriate temperatures and
under appropriate conditions in accordance with the requirements in the
products' labeling to preserve their identity, strength, quality, and
purity; and
    (ii) Protect against diversion and against distribution of products
that may be unfit for distribution.
    (d) Recalled products. The 3PL must establish, maintain, and follow
written policies and procedures to support manufacturer recalls.
    (e) Preparing for foreseeable crises. The 3PL must establish,
maintain, and follow written policies and procedures to prepare for,
protect against, and address any reasonably foreseeable crises that
could affect security or operations (such as strike, fire, or flood).
    (f) Products that are unfit for distribution. The 3PL must
establish, maintain, and follow written policies and procedures for
handling products that are adulterated, misbranded, or otherwise unfit
for distribution, as well as returned products, that:
    (1) Require such products to be physically segregated from other
products and dispositioned as directed by the applicable manufacturer,
wholesale distributor, dispenser, or an authorized government agency
and in accordance with all applicable State and Federal laws;
    (2) Identify a contact person responsible for communicating with
the manufacturer, wholesale distributor, dispenser, or an authorized
government agency regarding nonsaleable and returned products;
    (3) Include procedures to prevent products unfit for distribution
from entering the supply chain through the 3PL's disposition of
nonsaleable products; and
    (4) Require the 3PL to document the disposition of all nonsaleable
and returned products, and maintain such records for inventory
accountability.
    (g) Suspect product. The 3PL must establish, maintain, and follow
written policies and procedures to quarantine or destroy a suspect
product if directed to do so by the product's manufacturer, wholesale
distributor, dispenser, or an authorized government agency.
    (h) Illegitimate product. The 3PL must establish, maintain, and
follow written policies and procedures to store illegitimate product in
a clearly defined, designated area from which the product may be
dispositioned as directed by the respective manufacturer, wholesale
distributor, dispenser, or an authorized government agency.

Sec.  205.13  Recordkeeping and document maintenance.

    (a) Maintenance, availability, and accuracy of records and written
policies and procedures. All required records and written policies and
procedures outlined in Sec.  205.12 must:
    (1) Be readily retrievable and made available to licensing
authorities upon request;
    (2) Be securely stored from unauthorized access or modifications;
    (3) Contain only alterations signed and dated by the individual who
made the alteration. Such alteration must preserve the original
information and document the reason for the alteration; and
    (4) Accurately reflect the name of the 3PL as it appears on the 3PL
facility's license, which must match the information that is reported
to the Food and Drug Administration pursuant to the Food and Drug
Administration reporting requirements at Sec.  205.15.
    (b) Record and document retention. (1) Except for the records
listed in paragraph (b)(2) of this section, all records and written
policies and procedures required to be maintained by this part must be
retained for a period of 3 years.
    (2) Records of suspect and illegitimate products and destroyed,
returned, and recalled products must be retained for a period of 6
years.

Sec.  205.14   3PLs must provide upon request a list of trading
partners.

    A list of all manufacturers, wholesale distributors, repackagers,
and dispensers for which the 3PL conducts 3PL activities must be
readily retrievable and made available to regulatory authorities upon
request.

Sec.  205.15  Requirements for initial and annual reporting to the Food
and Drug Administration.

    (a) Electronic reporting requirement. The 3PL must report
electronically to the Food and Drug Administration using a secure
mechanism in a format the Food and Drug Administration can review,
process, and archive. Information reported will be included in the Food
and Drug Administration's public database for 3PLs to the extent
allowable by law.
    (b) Reporting periods--(1) Initial reporting. Any entity that owns
or operates a facility that conducts 3PL activities must report to the
Food and Drug Administration within 30 calendar days of obtaining an
initial State or Federal 3PL license.
    (2) Annual reporting. Any entity that owns or operates a facility
that is licensed to engage in 3PL activities must report to the Food
and Drug Administration each calendar year between January 1 and March
31.
    (c) Required information. Information reported for each 3PL
facility separately

licensed by the licensing authority must include:
    (1) A complete list of States by which the 3PL facility is
licensed, including the corresponding identification number and the
expiration date of each such license;
    (2) Name of company as it appears on the license and full business
address; and
    (3) All trade names or business names under which the 3PL conducts
business.
    (d) Timing for significant disciplinary action reporting--(1)
Initial reporting. The 3PL must report to the Food and Drug
Administration any significant disciplinary actions that occurred in
the previous 12 months.
    (2) Subsequent reporting. The 3PL must, within 30 calendar days of
a final action taken by a State or Federal licensing authority, report
significant disciplinary actions to the Food and Drug Administration.
    (e) Reporting voluntary withdrawal of a State license. The 3PL must
report to the Food and Drug Administration that it has withdrawn its
license in a State within 30 calendar days after such withdrawal,
including the reasons for the voluntary withdrawal of licensure.

Sec.  205.16  Inspections.

    (a) A physical inspection of a facility owned, rented, or leased by
a 3PL for conducting 3PL activities must be conducted prior to issuance
of the initial license by the licensing authority.
    (1) Where the State is the licensing authority, the State may
conduct the inspection or may accept an inspection by a third-party
accreditation or inspection service approved by the State licensing
authority. If the facility is out of state, the State may conduct the
inspection or may accept an inspection by the State in which the
facility is located.
    (2) Where the Food and Drug Administration is the licensing
authority, the Food and Drug Administration may conduct the inspection
or may accept an inspection by an organization approved by the Food and
Drug Administration under Sec.  205.18.
    (b) Routine inspections must be conducted thereafter once every 3
years by the licensing authority, a third-party approved organization
or inspection service approved by the Food and Drug Administration
under Sec.  205.18, or the State licensing the 3PL.
    (c) Records described in Sec.  205.12(a)(1) that are kept at the
inspection site or that can be immediately retrieved by computer or
other electronic means must be readily available for inspection during
the retention period. Records kept at a central location apart from the
inspection site and not electronically retrievable must be made
available for inspection within 2 business days of a request by a State
or Federal official, or sooner if necessitated by the duration of the
inspection.
    (d) The 3PLs must permit the Federal or State licensing authority
and third-party approved organizations or inspection services approved
by the Food and Drug Administration or the State to enter and inspect
their facilities and to audit their records and written operating
procedures.

Subpart B--Approved Organizations for 3PLS

Sec.  205.17  Use of approved third-party organizations.

    (a) A third-party organization that has been approved by the Food
and Drug Administration pursuant to Sec.  205.18 (or ``approved
organization'' (AO)) may conduct licensure review of a 3PL's
qualifications for licensure and may conduct inspections of 3PLs at the
periodic intervals specified in Sec.  205.16, as directed by the Food
and Drug Administration.
    (b) If an organization has been approved by the Food and Drug
Administration to conduct licensure review, the AO will:
    (1) Conduct the licensure review, which consists of:
    (i) Reviewing all documents submitted in support of the application
for 3PL licensure; and
    (ii) Inspecting the facility, as directed by the licensing
authority;
    (2) Complete the licensure review within a timeframe not to exceed
90 calendar days after receiving notice to conduct a licensure review
from the Food and Drug Administration;
    (3) Based on the licensure review, write a detailed document
including any findings and observations in support of the AO's
recommendation to the Food and Drug Administration to grant or deny
licensure; and
    (4) Send the original document to the Food and Drug Administration,
with a copy to the 3PL, within 7 calendar days of completing the
licensure review.
    (c) When conducting routine inspections at periodic intervals, the
AO will:
    (1) Complete the inspection within a timeframe not to exceed 90
calendar days after receiving notice to conduct an inspection from the
Food and Drug Administration;
    (2) Based on the inspection, write a detailed document including
any findings and observations in support of the AO's recommendation to
the Food and Drug Administration regarding a 3PL's licensure; and
    (3) Send the original document to the Food and Drug Administration,
with a copy to the 3PL, within 7 calendar days of completing the
inspection.
    (d) To maintain approval, an organization approved by the Food and
Drug Administration must:
    (1) Maintain records that support the AO's initial and continuing
qualifications for approval for a minimum of 5 years;
    (2) Maintain the following records related to licensure reviews for
a minimum of 5 years:
    (i) Supporting documentation reviewed as part of a licensure
review;
    (ii) Licensure review and inspection reports;
    (iii) Correspondence with the Food and Drug Administration and the
3PL associated with a licensure review; and
    (iv) Information on the identity and qualifications of all AO
personnel who contributed to the licensure review, including a
certification that such personnel have complied with all applicable
requirements set forth in subpart A of this part and are free of any
conflicts of interest, as set forth at 5 CFR part 2635 and 18 U.S.C.
208.
    (e) Records maintained by the AO must:
    (1) Be readily retrievable and made available to Federal licensing
authorities upon request;
    (2) Be maintained and protected in accordance with all applicable
laws, including those regarding protection of personal identifying
information and confidential commercial information;
    (3) Be secure from unauthorized access or modifications; and
    (4) Contain only alterations signed and dated by the individual who
made the alteration. Such alteration must preserve the original
information and document the reason for the alteration.
    (f) An AO must report to the Food and Drug Administration within 24
hours of discovering any evidence or observations of potential
violations found at a 3PL facility during an inspection of the facility
that could pose an imminent threat to the public health. Reports must
be made in the manner prescribed by the Food and Drug Administration.

Sec.  205.18  General qualifications of approved organizations.

    (a) To become and remain an AO, the organization and anyone
employed by the organization, including contractors used by the
organization:
    (1) Must not be a current Federal or State government employee;
    (2) Must not engage in prescription drug-related activities,
excluding

participation in the Agency's AO program and related activities, but
including and not limited to manufacturing, wholesale distribution,
repackaging, relabeling, dispensing, or 3PL activities;
    (3) Must disclose to the Food and Drug Administration any
participation or financial interest in entities that participate in the
design, manufacture, promotion, or sale of articles or activities that
are predominantly FDA-regulated or are expected to result in FDA-
regulated articles;
    (4) Must not be owned or controlled by, or have any organizational,
material, or financial affiliation with, any of the entities engaged in
manufacturing, wholesale distribution, repackaging, relabeling,
dispensing, 3PL activities, or the design, manufacture, promotion, or
sale of prescription drugs as defined in section 581(12) of the Federal
Food, Drug, and Cosmetic Act;
    (5) Must enter and abide by a written agreement with the applicant
before data and information otherwise exempt from public disclosure may
be disclosed to the AO or a contractor;
    (6) Must operate in accordance with professional and ethical
business practices and applicable legal requirements, which include,
but are not limited to:
    (i) Protecting against conflicts of interest as set forth in 5 CFR
part 2635 and 18 U.S.C. 208;
    (ii) Ensuring that the personnel employed or contracted by the AO
who are working on licensure reviews have sufficient education,
training, knowledge, and experience to conduct licensure reviews of
3PLs;
    (iii) Treating received information, records, and reports that
qualify as confidential commercial information as described at 5 U.S.C.
552(b)(4) according to applicable requirements for such information;
    (iv) Maintaining appropriate security and protection, physical and
electronic, of any information received in relation to licensure
reviews to preserve confidentiality and ensure that the release of any
information is limited to authorized disclosures to either the Food and
Drug Administration or the 3PL facility;
    (v) Reporting information to the Food and Drug Administration and
entities for which licensure reviews were conducted that accurately
reflects data reviewed, inspectional observations made, and other
matters that relate to compliance with the Federal Food, Drug, and
Cosmetic Act; and
    (vi) Promptly responding to and attempting to resolve any
complaints regarding activities for which it is approved by the Food
and Drug Administration; and
    (7) Must establish and maintain policies, procedures, and
documentation to demonstrate that, at the time of application and
throughout their tenure as an AO, the applicant has satisfied and can
continue to satisfy the requirements to qualify as an AO capable of
assessing compliance with all 3PL requirements. Such policies,
procedures, and documentation must include, but are not limited to:
    (i) AO program administration;
    (ii) Disciplinary actions and corrective measures;
    (iii) Recordkeeping and confidentiality;
    (iv) Use of contractors; and
    (v) Personnel qualifications and ongoing training.
    (b) If an AO elects to use contractors for licensure reviews or
licensure review-related activities, the AO remains responsible for the
work of the contractors at all times.
    (1) AOs that use contractors to conduct licensure reviews must
abide by the confidentiality agreements between the Food and Drug
Administration and the AO and have policies and procedures in place to
ensure the contractor's continuing compliance with this part, as well
as competence and qualifications to conduct licensure reviews. Such
policies and procedures must ensure that contractors:
    (i) Meet the qualifications set forth in paragraph (a) of this
section;
    (ii) Do not subcontract their licensure review duties, and that
contractors are removed if such requirement is violated;
    (iii) Abide by the policies and procedures of the AO, as set forth
in Sec.  205.19(b); and
    (iv) Complete and pass the same training required by the AO, as set
forth in Sec.  205.19(c).
    (2) If an AO elects to use contractors to conduct licensure
reviews, the AO must receive and keep a record of written consent from
the 3PL to share confidential commercial information with contractors
by which a licensure review is being conducted.
    (3) AOs that elect to use contractors must submit to the Food and
Drug Administration a list of contractors used by the organization,
accompanied by a statement from the organization certifying that such
contractors meet the requirements of this subpart.

Sec.  205.19  Process and procedures for approval by the Food and Drug
Administration.

    (a) Application. An application to become an AO must be completed
and submitted electronically to the Food and Drug Administration in a
format the Food and Drug Administration can review, process, and
archive.
    (b) Required application information. Policies, procedures, and
documentation as required by Sec.  205.18(a)(7) must accompany the
application.
    (c) Training. Organizations must provide training as prescribed by
the Food and Drug Administration, and any individual who conducts
licensure reviews or supervises individuals who conduct licensure
reviews is required to undergo and pass the prescribed training.
    (1) If an individual does not pass training, that person must wait
30 days before retaking the training and may be required to show proof
of additional education or experiential learning to demonstrate
competence before retaking the training evaluation.
    (2) To maintain approval, individuals employed by the AO and
conducting licensure reviews or supervising those who conduct licensure
reviews must undergo and pass annual training as prescribed by the Food
and Drug Administration. Failure to complete and pass annual training
may result in suspension of approval of the AO.
    (3) The Food and Drug Administration may require additional
training. If such additional training is required, AOs will be given a
set time period during which training must be completed and passed to
maintain approval.
    (d) Auditing. Prior to conducting licensure reviews, an AO must
undergo an onsite audit by the Food and Drug Administration. The Food
and Drug Administration may also conduct random, periodic audits, as
well as for-cause audits, of an AO, as set forth in paragraph (o) of
this section.
    (e) Duration of approval and renewal process. (1) The Food and Drug
Administration approval to conduct licensure reviews is valid for a
period of 5 years.
    (2) AOs may submit a renewal application to the Food and Drug
Administration 6 months prior to the expiration date, but no later than
3 months prior to the expiration date, to renew the approval.
    (i) If a renewal application is submitted less than 3 months before
the date of expiration, the AO's approval will expire if approval is
not renewed prior to the date of expiration.
    (ii) Upon expiration of the AO's approval, the AO must cease
conducting any licensure review or inspection-related activities.

    (f) Denial of approval. If an organization does not meet all of the
Food and Drug Administration's standards detailed in Sec. Sec.  205.17
and 205.18 for becoming an AO, the Food and Drug Administration will
deny approval of the application in writing. Requests for review and
reconsideration of a denial of approval must be submitted to the Food
and Drug Administration within 30 calendar days of the date of the Food
and Drug Administration's decision to deny the application. If, upon
reconsideration, the Food and Drug Administration denies the
applicant's request for approval, the Food and Drug Administration will
provide the applicant written notice of the denial and an opportunity
to appeal pursuant to Sec.  10.75 of this chapter.
    (g) Suspension of approval after notice and opportunity to request
a hearing. (1) The Food and Drug Administration may suspend approval of
an organization after an opportunity to request a hearing when there is
a reasonable probability that the organization's noncompliance will
negatively impact public health.
    (2) If an AO fails to maintain the Food and Drug Administration's
standards pursuant to Sec. Sec.  205.17 and 205.18, the Food and Drug
Administration will give written notice of the intent to suspend the
organization's approval, including the grounds for the suspension, and
the AO will have 30 days to provide additional information to the Food
and Drug Administration for reconsideration.
    (3) If, upon reconsideration, the Food and Drug Administration
still believes the AO's approval should be suspended, the Food and Drug
Administration will issue the AO a written formal notice of intent to
suspend, along with notice of the opportunity to request a hearing
pursuant to part 16 of this chapter.
    (4) An AO that wishes to request a hearing has 10 calendar days
after the date of the formal notice of intent to suspend to submit a
written notice of participation and request for a hearing. An AO that
fails to submit a written notice of participation and request for a
hearing within 10 calendar days from the date of the notice waives the
opportunity for a hearing.
    (5) A suspended AO must notify any 3PLs under a pending licensure
review by the AO of the AO's suspension within 7 calendar days.
    (h) Immediate suspension of approval. (1) When there is a
reasonable probability that the organization's noncompliance will cause
imminent and serious adverse health consequences or death to humans,
the Food and Drug Administration will suspend an AO's approval
effective immediately.
    (2) In such a situation, the Food and Drug Administration will
provide the AO a written notice of immediate suspension, along with
notice and opportunity to request a hearing pursuant to part 16 of this
chapter within 14 calendar days of the AO's request for such hearing.
    (3) An AO that wishes to request a hearing has 10 calendar days
after the date of the formal notice of suspension to submit a written
notice of participation and request for a hearing. An AO that fails to
submit a written notice of participation and request for a hearing
within 10 calendar days waives the opportunity for a hearing.
    (i) Reinstatement of approval. (1) An organization's approval may
be reinstated if the Food and Drug Administration determines that the
suspended organization has rectified the issues leading to the
suspension and can meet the standards set forth in this subpart. The
organization must rectify the issues and come into compliance with the
standards set forth in this subpart within 1 year from the date of
suspension. If the issues have not been rectified within 1 year, or if
the organization otherwise has failed to come into compliance with the
standards set forth in this subpart within such time period, the Food
and Drug Administration may revoke the AO's approval subject to the
provisions of this part.
    (2) An organization whose approval has been reinstated on a
conditional basis will be subject to a 3-year probationary period, and
if any material deficiencies arise during that period, the
organization's approval will be revoked.
    (j) Revocation of approval. (1) The Food and Drug Administration
may revoke approval of an organization whose approval has been
suspended pursuant to paragraphs (g) and (h) of this section:
    (i) If an organization fails to demonstrate its intent to rectify
the issues leading to the suspension within 6 months from the date of
suspension; or
    (ii) If the Food and Drug Administration determines that the
organization failed to rectify the issues leading to the suspension to
the Agency's satisfaction within 1 year of the date of suspension.
    (2) The Food and Drug Administration will give written notice of
the intent to revoke the organization's approval, including the grounds
for the revocation, and an opportunity to request a hearing pursuant to
part 16 of this chapter.
    (3) The AO must submit a written notice of participation and
request a hearing within 10 calendar days after the date of the notice
of revocation. An AO that fails to submit a written notice of
participation and request for hearing within 10 calendar days waives
the opportunity for a hearing.
    (4) An organization whose approval has been revoked that wishes to
reapply to be an AO must submit a new application to the Food and Drug
Administration.
    (k) Requests for reconsideration of Agency decision. (1) The Food
and Drug Administration will follow the process outlined at Sec.  10.75
of this chapter to review matters relating to denial of approval,
including review of the organization's application.
    (2) The Food and Drug Administration will follow the process
outlined at part 16 of this chapter to review matters relating to a
suspension or revocation action, including review of the organization's
application and administrative file.
    (3) The Food and Drug Administration's decision after a request for
reconsideration of denial, suspension, or revocation constitutes a
final Agency action under 5 U.S.C. 702.
    (l) Voluntary withdrawal of approval. (1) An organization wishing
to voluntarily withdraw its approval, including but not limited to when
an AO goes out of business, must notify the Food and Drug
Administration in writing at least 6 months prior to the date the
organization intends for the withdrawal to become effective.
    (i) If an AO determines it will be withdrawing its approval with
the Food and Drug Administration in less than 6 months, it must notify
the Food and Drug Administration immediately of its intent to withdraw,
and such notification must inform the Food and Drug Administration of
the date the organization will cease business operations.
    (ii) [Reserved]
    (2) No later than 7 calendar days after notifying FDA, the
organization must notify any facilities with pending reviews that it
intends to withdraw its approval with the Food and Drug Administration
and must provide the date on which the withdrawal is effective.
    (m) AO-required notifications to 3PLs. The AO must, within 7
calendar days of the date of suspension, revocation, or voluntary
withdrawal of approval, notify those 3PL facilities that have pending
licensure reviews of the AO's suspension or revocation. This

notification must inform the 3PL facility that it must apply for
licensure review with another AO, or the Food and Drug Administration
if no other AO is available to conduct the licensure review.
    (n) Change of operation or ownership. (1) The AO must report to the
Food and Drug Administration within 30 calendar days any changes to the
information submitted in the application for approval.
    (2) Approval is not transferable.
    (i) Changes in ownership of an AO require the organization to
submit a new application to the Food and Drug Administration.
    (ii) Such application must be submitted to the Food and Drug
Administration no later than 30 calendar days prior to the date of the
change of ownership.
    (iii) No later than 30 calendar days before the date of the change
of ownership, the AO must notify any 3PL facilities with pending
applications of the pending change in ownership.
    (iv) On the date the change of ownership takes place, the original
approval is void.
    (o) Monitoring by the Food and Drug Administration. (1) AOs are
subject to audits by the Food and Drug Administration to ensure
compliance with the Food and Drug Administration's requirements for
approval.
    (2) If an AO refuses to cooperate with the Food and Drug
Administration's audit, the organization's approval may be suspended
pursuant to paragraph (g)(1) of this section.

Subpart C--Wholesale Distributors Licensure Standards

Sec.  205.20  Requirement that prescription drug wholesale distributors
be licensed.

    (a) No wholesale distributor may engage in wholesale distribution
of a prescription drug unless the person is licensed:
    (1) By the State from which the drug is distributed; or
    (2) If the State from which the drug is distributed has not
established a licensure requirement in accordance with the standards
set forth in this part, by the Food and Drug Administration; and
    (3) If the drug is distributed interstate, by the State into which
the drug is distributed if such licensure is required by that State.
    (b) Any license issued or renewed pursuant to this section will
expire 2 years after the date on which the license was issued. A
wholesale distributor may submit a renewal application up to 90
calendar days before the date of expiration. A license will be
considered valid during any period of the administrative delay on the
part of the licensing authority, if the wholesale distributor timely
submitted the renewal application.

Sec.  205.21  Surety bond requirement.

    (a) Surety bond compliance. No wholesale distributor will be
licensed under this section unless the wholesale distributor has
furnished a bond, or other equivalent means of security acceptable to
the State if the State is the licensing authority, that complies with
the requirements of this section.
    (b) Surety bond requirements. (1) For the issuance or renewal of a
wholesale distributor license, an applicant that is not a government-
owned and -operated wholesale distributor must submit to the licensing
authority a surety bond from an authorized surety company of $100,000
or other equivalent means of security acceptable to the State. The term
of the initial surety bond must be effective on the date that the
application is submitted to the licensing authority.
    (2) The licensing authority may accept a surety bond from an
authorized surety company in the amount of $25,000 if the annual gross
receipts of the previous tax year for the wholesale distributor are
$10,000,000 or less.
    (3) If a wholesale distributor can provide evidence that it
possesses the required bond in the State where the wholesale
distributor is located, the requirement for a bond in another State for
a non-resident wholesale distributor license will be waived.
    (c) Terms of the surety bond. (1) The terms of the bond submitted
by a wholesale distributor must on its face reflect the requirements of
this section, including meeting the requirements of liability coverage
($100,000 or $25,000, as applicable), as well as the responsibilities
of the surety company and wholesale distributor as set forth in this
section.
    (2) The bond must be continuous and remain in full force and
effect, running concurrently with the license period and for every
succeeding licensing period for which the wholesale distributor may be
licensed. The bond must remain in full force and effect until 1 year
after the license expires, after which liability for license
administrative fees ceases except as to any liability or indebtedness
incurred or accrued before the termination date.
    (3) The bond must guarantee that after receiving written notice
from the licensing authority containing sufficient evidence to
establish the surety's liability under the bond, the surety company
will pay within 30 calendar days any administrative fines or penalties
imposed by the licensing authority on the wholesale distributor holding
the surety bond in that State. This includes any fees and costs
incurred by the licensing authority regarding that license authorized
by law and which the wholesale distributor fails to pay within 30
calendar days after the fine or costs become final. Any such claim may
be made directly to the surety company and need not be preceded by the
filing of any action in a proper court.
    (4) The licensing authority may make a claim against the surety
bond until 1 year after the date of expiration on the wholesale
distributor's license or until 60 calendar days after any
administrative or legal proceeding, which involved the wholesale
distributor, is concluded, including any appeal, whichever occurs
later.
    (d) Cancellation of a bond and lapse of surety bond coverage. (1) A
wholesale distributor may cancel its surety bond and must provide
written notice 30 calendar days before the effective date of the
cancellation to all applicable licensing authorities and the surety
company.
    (2) Cancellation of a surety bond is grounds for suspension of the
wholesale distributor's license unless the wholesale distributor
provides a new bond before the effective date of the bond's
cancellation. If a new surety bond is provided before the effective
date of the bond's cancellation, the liability of the surety company
continues until the cancellation date. Otherwise, the liability of the
surety company continues for 1 year after the date of cancellation,
after which liability ceases except as to any liability or indebtedness
incurred or accrued before the cancellation date.
    (3) The wholesale distributor must immediately notify the licensing
authority if there is a lapse in the wholesale distributor's surety
coverage.
    (4) If the licensing authority discovers a lapse in bond coverage
that has not been previously disclosed by the wholesale distributor,
the wholesale distributor's license will be suspended pursuant to Sec.
205.30.
    (e) Actions under the surety bond. The bond must provide that
actions under the bond may be brought by a State or Federal licensing
authority.
    (f) Required surety company information on the surety bond. The
bond must provide the surety company's name, street address or post
office box number, city, State, and zip code.

    (g) Change of surety company. A wholesale distributor that obtains
a replacement surety bond from a different surety company to cover the
remaining term of a previously obtained bond must submit the new surety
bond to the licensing authority 30 calendar days prior to the
expiration of the previous surety bond. There must be no gap in the
coverage of the surety bond periods.
    (h) Parties to the surety bond. The surety bond must name the
wholesale distributor as Principal, the licensing authority as obligee,
and the surety company (and its heirs, executors, administrators,
successors, and assignees, jointly and severally) as surety.

Sec.  205.22  General application requirements for licensure.

    (a) Applicant requirements. An individual who submits an
application on behalf of a wholesale distributor for a license issued
pursuant to this subpart must:
    (1) Be 18 years of age or older;
    (2) Submit an affidavit that their ownership or management of or
employment by the entity would not preclude the entity from receiving
or maintaining a license under Sec.  205.25(a);
    (3) Submit all application information required in the form
required by the licensing authority; and
    (4) Pay any licensing fees that are required by the licensing
authority pursuant to section 503(e)(3) of the Federal Food, Drug, and
Cosmetic Act.
    (b) Surety bond requirement. The wholesale distributor must furnish
a bond, or other equivalent means of security acceptable to the State,
with the application for licensure in accordance with the surety bond
requirements in Sec.  205.21.
    (c) General requirements for licensure application. The State or
Federal licensing authority will require the following information from
each wholesale distributor as part of the initial application for the
license described in this section and as part of any renewal of such
license:
    (1) The name and title of the individual who submits the
application for licensure on behalf of the wholesale distributor;
    (2) The name of the wholesale distributor as it should appear on
the license and the full business address and telephone number of the
wholesale distributor;
    (3) All trade or business names used by the wholesale distributor,
including prior trade or business names, within the past 7 years;
    (4) Name, email address, and telephone number of the designated
representative or facility manager for the wholesale distributor;
    (5) The type of ownership or operation of the business entity, such
as a partnership, corporation, limited liability company, or sole
proprietorship;
    (6) The name of any owners or operators of the wholesale
distributor, including:
    (i) If a sole proprietorship, the full name of the sole proprietor
and the name of the business entity;
    (ii) If a partnership, the name of each partner and the name of the
partnership;
    (iii) If a corporation, the corporate names, the names of any
subsidiaries and affiliates, the name and title of each corporate
officer and director, and the State of incorporation; and
    (iv) If a limited liability company, the name of the limited
liability company, including any subsidiaries and affiliates, the name
of each member, and the State in which the limited liability company
was organized;
    (7) Whether the wholesale distributor has ever been convicted of a
felony relating to wholesale drug distribution, a felony conviction of
section 301(i) or (k) of the Federal Food, Drug, and Cosmetic Act, or a
felony conviction of 18 U.S.C. 1365, relating to product tampering,
together with details concerning any such events; and
    (8) Whether the wholesale distributor has received any citations
for violating requirements for licensure within the past 7 years or has
received any significant disciplinary actions within the past 7 years
that presented a threat of serious adverse health consequences or death
to humans, together with details concerning any such events.
    (d) General requirements for licensure renewal. To renew a license,
the wholesale distributor must submit the following to the renewing
licensing authority:
    (1) Certification that the wholesale distributor has continued to
meet all the standards and complied with the requirements in this
subpart since the previous license was issued; and
    (2) Information about any changes to information previously
submitted under this section, or Sec.  205.21, or Sec.  205.23(c) for
which a notification was not already submitted to the licensing
authority under Sec.  205.24.
    (e) License availability requirement. The wholesale distributor
must maintain its license in a readily retrievable manner and must
permit inspection of the license by any official, agent, or employee of
the licensing authority or of any Federal, State, or local agency
engaged in enforcement of laws relating to the distribution of
prescription drugs.

Sec.  205.23  Federal licensure process.

    (a) Procedures for filing an FDA application for a wholesale
distributor license. (1) All wholesale distributors must electronically
submit an application to the Food and Drug Administration for a license
to engage in wholesale distribution if the State does not have a
licensing program for wholesale distributors consistent with the
standards set forth in this section. The application must include the
information in Sec. Sec.  205.21 and 205.22, along with a surety bond
and supporting documentation that demonstrates the applicant's ability
to comply with requirements intended to ensure the continued safety,
identity, strength, quality, and purity of the prescription drugs.
    (2) If one or more organizations have been approved by the Food and
Drug Administration under Sec.  205.32 to conduct inspections of
wholesale distributors, the wholesale distributor will indicate in its
application to the Food and Drug Administration which AO it prefers to
conduct its inspection.
    (3) If there is no organization approved by the Food and Drug
Administration to conduct inspections for wholesale distributors, the
Food and Drug Administration will conduct the inspection, as described
in Sec.  205.28(b).
    (4) The applicant, or the applicant's agent or other authorized
official, must sign the application.
    (5) An application for a wholesale distributor license will not be
considered as filed until the Food and Drug Administration has received
all required information and fees.
    (b) Determination that licensing requirements have been met. The
Food and Drug Administration, not an AO, will determine whether the
wholesale distributor meets all the applicable requirements set forth
in this part.
    (c) Notification of easily correctable deficiencies. The Food and
Drug Administration will make reasonable efforts to promptly
communicate to applicants easily correctable deficiencies found in an
application when those deficiencies are discovered. The Food and Drug
Administration will also promptly inform applicants if more data or
information is needed to facilitate the Agency's review.
    (d) Issuance of wholesale distributor license by FDA. Approval of a
wholesale distributor license application or issuance of a wholesale
distributor license constitutes a determination by the Food and Drug
Administration that, based upon information received, the

wholesale distributor meets the applicable requirements to be licensed
under sections 503(e)(1) and 583 of the Federal Food, Drug, and
Cosmetic Act. The Food and Drug Administration will approve an
application and send the applicant an approval letter and license
certificate if none of the reasons in Sec.  205.30(a)(1) for refusing
to approve the application applies. Applicable requirements for
wholesale distributors to engage in wholesale distribution must include
but not be limited to the good storage practices set forth under Sec.
205.26. A license is effective on the date of issuance of the license
certificate.
    (e) Validity of a wholesale distributor license. Licenses issued to
a wholesale distributor will remain valid until the date of expiration,
unless suspended or revoked.

Sec.  205.24  Changes to information, operation, location, or ownership
of a wholesale distributor.

    (a) Any change to any information required in this subpart,
including changes to any information required pursuant to Sec. Sec.
205.21, 205.22, and 205.25, must be submitted electronically to the
licensing authority within 30 calendar days after such change is
effective, except where otherwise provided in this subpart.
    (b) Any change in the location of a wholesale distributor at which
wholesale distribution occurs will require an inspection of the new
facility prior to the wholesale distributor beginning operations at the
new facility.
    (1) On the date the change of location takes place, the wholesale
distributor may not engage in wholesale distribution at the original
facility.
    (2) [Reserved]
    (c) Any change in the person engaged in wholesale distribution will
require a new license prior to beginning operations.
    (1) The application for a new license required by Sec.  205.23 must
be submitted no later than 30 calendar days prior to the change in
ownership.
    (2) A new inspection of the wholesale distributor will be performed
within a reasonable time.
    (3) A wholesale distributor can continue to operate under the
original license for 30 calendar days after the change of ownership
occurs or until the license application of the new owner is approved,
whichever is sooner.

Sec.  205.25  Prohibited persons and qualifications for key personnel.

    (a) A wholesale distributor is prohibited from obtaining or
maintaining licensure if the wholesale distributor has been:
    (1) Convicted of any felony for violation of section 301(i) or (k)
of the Federal Food, Drug, and Cosmetic Act;
    (2) Convicted of any felony violation of 18 U.S.C. 1365 relating to
product tampering; or
    (3) Cited on two or more occasions within the previous 7 years for
violating one or more of the requirements of section 583 or section
503(e) of the Federal Food, Drug, and Cosmetic Act or State
requirements for licensure in such a way that presents a threat of
serious adverse health consequences or death to humans.
    (b) All key personnel must have the education, background,
training, and experience necessary to perform his or her assigned
functions.
    (c) Licensure may also be denied when an applicant wholesale
distributor or any of their key personnel has been:
    (1) Found to have delayed or otherwise impeded an inspection by the
Federal or State licensing authority or an approved third-party
inspector, or an inspector, after reasonable efforts, was unable to
gain access to an establishment or a location to carry out the
inspection required under Sec.  205.28, as permitted by section 704(a)
of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 374(a));
    (2) Found to have omitted material information or furnished false
or fraudulent information in an application made about the distribution
of prescription drugs; or
    (3) Subject to licensure suspension or revocation by Federal,
State, or local government for any license currently or previously held
by the applicant for the manufacture or distribution of any drugs,
including controlled substances.
    (d) The wholesale distributor must maintain a list of officers,
directors, facility managers, designated representatives, and other key
personnel in charge of wholesale distribution, including storage and
handling, and include a description of their duties and a summary of
their qualifications. This list must be available for review by the
State or Federal licensing authority.
    (e) The wholesale distributor must establish and implement written
policies and procedures designed to ensure that the qualifications of
key personnel as required in this section are met, maintained, and
documented. These written policies and procedures must be available for
review by the State or Federal licensing authority, as provided in
Sec.  205.27. These policies and procedures must identify the personnel
at the wholesale distributor's facility who are responsible for the
following actions:
    (1) Implementing and maintaining all facility and personnel
requirements;
    (2) Ensuring that the facility complies with all licensure and
reporting requirements; and
    (3) Ensuring that key personnel receive initial and regular
training to ensure competence relevant to their job functions.
    (f) In addition to the qualifications for key personnel in
paragraphs (a) through (e) of this section, a facility manager or
designated representative must have the following qualifications to
carry out those responsibilities:
    (1) Serves as the facility manager or designated representative of
such facility manager for only one facility at any one time;
    (2) Is actively involved in and responsible for managing the daily
operations of the wholesale distributor facility; and
    (3) Remains responsible for all facility manager or designated
representative duties that are delegated to other personnel at the
facility.
    (g) Any facility manager or designated representative, prior to
their association, employment, or contracting with the wholesale
distributor as a facility manager or designated representative, must
submit a full set of fingerprints for purposes of conducting local and
national criminal background checks. The results of the background
checks must demonstrate no history of criminal convictions pursuant to
paragraph (a) of this section.

Sec.  205.26  National standards for the storage and handling of
prescription drugs for wholesale distribution.

    Any facility owned, rented, or leased by a wholesale distributor
for engaging in wholesale distribution must meet the facility
requirements in paragraphs (a) and (b) of this section, and the
wholesale distributor must establish, maintain, and follow policies and
procedures as set forth in paragraph (c) of this section.
    (a) A wholesale distributor to which a license has been issued in
the same name and at the same address as another authorized trading
partner, such as a 3PL, must maintain separate systems and processes
for the distribution of drugs that are specific to the wholesale
distributor.
    (b) The facility the wholesale distributor owns, leases, or rents
for purposes of engaging in wholesale distribution must be suitable for
the storage and handling of prescription drugs, as demonstrated by the
following:
    (1) General requirements. The facility is:
    (i) Not a personal residence;

    (ii) Of a suitable size, construction, and configuration designed
to ensure proper distribution, including storage and handing, of all
prescription drugs stored at or distributed from the facility;
    (iii) Of a suitable size, construction, and configuration to
facilitate cleaning, maintenance, and proper wholesale distribution
operations;
    (iv) Maintained in a clean and orderly condition, free from
infestation of any kind;
    (v) Equipped with sufficient lighting, ventilation, temperature,
sanitation, humidity, space, equipment, and secure conditions for
prescription drug storage; and
    (vi) Equipped with clearly defined designated areas that separate
saleable prescription drugs from prescription drugs that are unfit for
distribution.
    (2) Security of premises. The facility must be equipped with
adequate security to prevent breaches. Adequate security includes
ensuring that:
    (i) The facility is secure from unauthorized entry;
    (ii) Access from outside the premises is limited, well controlled,
and documented;
    (iii) The outside perimeter of the premises is well lit;
    (iv) Entry into areas where prescription drugs are held is limited
to key personnel who possess appropriate and verifiable experience and
training necessary to safely and lawfully engage in the distribution of
prescription drugs, as described in Sec.  205.25, and to staff for
purposes of maintenance and cleaning; and
    (v) The facility is equipped with a security system that protects
against theft and diversion of prescription drugs and accidental or
unsanctioned modifications to data, including an alarm system to detect
and notify appropriate personnel of any unauthorized entry.
    (3) Equipment. The facility must have equipment that ensures
prescription drugs are properly stored, including cold storage,
refrigerators, temperature and humidity devices, and air handling
units. All equipment utilized must be maintained in good repair and
must be suitable for the distribution, including receipt, storing, and
handling, warehousing, holding, displaying, or transporting of
prescription drugs, as demonstrated by the following:
    (i) All equipment must be installed, maintained, and repaired by
qualified individuals following written procedures established by the
wholesale distributor. The wholesale distributor must be able to
demonstrate that all equipment has been calibrated, as applicable, and
validated at regular intervals to achieve the intended results
accurately, consistently, and in a manner that can be reproduced by
qualified individuals following the wholesale distributor's written
procedures. Such actions must be documented;
    (ii) Appropriate manual, electromechanical, or electronic
temperature and humidity recording equipment or logs must be used to
document proper storage of prescription drugs; and
    (iii) Monitoring equipment must immediately alert appropriate
personnel of any deviations from the required storage conditions.
    (4) Facility assessments. Facility assessments, including
temperature mapping and other assessments designed to ensure
prescription drugs are properly stored in accordance with their
labeling, must be regularly conducted and documented.
    (c) Every wholesale distributor must establish, maintain, and
follow written policies and procedures for each of the requirements
described in this section that are relevant to the scope of the
wholesale distributor's activities involving prescription drugs at the
facility. The written policies and procedures must describe a system by
which the wholesale distributor will monitor all processes, and, if
deviations occur, promptly document and investigate to determine the
root cause of the deviation. If a wholesale distributor uses a
contractor to carry out any of its duties, the wholesale distributor
remains responsible for compliance with this subpart and must ensure
that the contractor abides by the applicable written policies and
procedures. The written policies and procedures must clearly describe
the responsibilities of the wholesale distributor and any contractors
used to fulfill the wholesale distributor's duties. Such arrangements
must be documented and carried out in accordance with the requirements
of this section.
    (1) Authorized trading partners. The wholesale distributor must
ensure that it conducts business only with other authorized trading
partners as defined in section 581(2) and (23) of the Federal Food,
Drug, and Cosmetic Act.
    (2) Facility and equipment maintenance management. The wholesale
distributor must ensure that the facility requirements in paragraph (b)
of this section are met.
    (3) Transportation. The wholesale distributor must ensure
prescription drugs are transported in a manner that:
    (i) Protects against breakage, contamination, adulteration, and
theft;
    (ii) Prevents exposure to conditions that may compromise
prescription drug identity, strength, quality, or purity; and
    (iii) Ensures that deviations from storage requirements during
transport are identified, investigated, documented, corrected, and
reported no later than 24 hours after discovery to the authorized
trading partner from which the prescription drug was received, and to
the manufacturer to determine if further commercial distribution is
appropriate.
    (4) Examination of shipping containers. The wholesale distributor
must ensure that all shipping containers are examined in accordance
with the following standards:
    (i) Incoming shipments. Upon receipt, each shipping container must
be visually examined for identity and to prevent the acceptance of
prescription drugs that are unfit for distribution. This examination
must be adequate to detect conditions that would suggest that the
prescription drug may be unfit for distribution, such as alterations
made or damage to the shipping container.
    (ii) Outgoing shipments. Each outgoing shipment must be properly
inspected for identity of the prescription drug to ensure that there is
no shipment of a prescription drug that has been damaged in storage or
held under improper conditions and to prevent the introduction or
further shipment of any prescription drug that is unfit for
distribution, including through the wholesale distributor's processing
of returned or recalled drugs.
    (5) Storage and handling. The wholesale distributor must ensure
that prescription drugs are stored at appropriate temperatures and
under appropriate conditions in accordance with the drugs' labeling,
except that if no storage requirements are established in the drug's
labeling, the drug may be held at controlled room temperature to
preserve the drug's identity, strength, quality, and purity.
    (i) Inventory management. The wholesale distributor must:
    (A) Ensure compliance with the requirements of section 582(c) of
the Federal Food, Drug, and Cosmetic Act;
    (B) Ensure that the facility's stock is inspected regularly to
protect against drug diversion and distribution of prescription drugs
that are unfit for distribution;
    (C) Investigate, document, and correct any stock irregularities,
including theft, loss, or diversion of prescription drugs, in
accordance with section 582(c) of the Federal Food, Drug, and Cosmetic
Act, as applicable;
    (D) Ensure that any prescription drug that appears to be unfit for
distribution

is removed from saleable stock and handled appropriately according to
the requirements in paragraphs (c)(5)(ii) through (iv) of this section;
    (E) Immediately report any confirmed losses or theft of
prescription drugs to the manufacturer of the drug and the Food and
Drug Administration; and
    (F) Ensure that records related to the actions required in
paragraphs (c)(5)(i) through (iv) of this section are kept according to
Sec.  205.27.
    (ii) Handling of prescription drugs. The wholesale distributor must
ensure that only prescription drugs fit for distribution are further
distributed or transferred.
    (A) Any prescription drug that appears to be unfit for distribution
must be stored in a secure area clearly defined for such use and
physically segregated from saleable drugs, or electronically
segregated, if appropriate, until the wholesale distributor determines
by thorough examination that such drugs are fit for human use or
nonsaleable.
    (B) Any prescription drug found to be adulterated, misbranded, or
otherwise unfit for distribution must be stored in a secure area
clearly defined for such use and physically or electronically
segregated from saleable drugs until they are returned to the supplier
or destroyed in accordance with the standards in paragraph (c)(6) of
this section.
    (C) If a prescription drug is determined to be a suspect or
illegitimate product, those suspect or illegitimate products must be
handled according to the requirements of section 582(c)(4) of the
Federal Food, Drug, and Cosmetic Act.
    (iii) Returned prescription drugs. All returned prescription drugs
must be stored in a secure area clearly defined for such use and
physically segregated from saleable prescription drugs, until the
wholesale distributor determines by thorough examination that such
drugs are saleable or nonsaleable.
    (A) Saleable returns. Prescription drugs may be returned to
saleable stock only if the conditions under which the drug has been
returned do not cast doubt on the drug's safety, identity, strength,
quality, or purity. In determining whether the conditions under which a
drug has been returned cast doubt on the drug's safety, identity,
strength, quality, or purity, the wholesale distributor must consider,
among other things, the conditions under which the drug has been held,
stored, or shipped.
    (B) Nonsaleable returns. If the conditions under which the
prescription drug has been returned cast doubt on the drug's safety,
identity, strength, quality, or purity, drugs may be returned to the
manufacturer or repackager, to the wholesale distributor from which
such drug was purchased, or to an individual acting on behalf of such
an entity, including a returns processor, or may be destroyed in a
timely manner and in accordance with paragraph (c)(6) of this section
and all applicable Federal and State laws.
    (iv) Recalled drugs. Recalled prescription drugs must be handled as
instructed by the manufacturer in the recall notice, which may require
that the recalled drugs be stored in a secure area clearly defined for
such purpose and physically segregated from saleable drugs until they
are returned to the manufacturer or repackager, to the wholesale
distributor from which such drug was purchased, or to an individual
acting on behalf of such an entity, including a returns processor, or
destroyed in accordance with the standards in paragraph (c)(6) of this
section.
    (6) Disposition of drugs. The wholesale distributor must establish,
maintain, and follow written policies and procedures that ensure that
prescription drugs removed from the pharmaceutical distribution supply
chain because they are determined to be unfit for distribution are
retained for further examination, returned to the manufacturer or
repackager, returned to the wholesale distributor from which such drug
was purchased, or returned to an individual acting on behalf of such an
entity, including a returns processor, or destroyed in accordance with
all applicable Federal and State laws and the following standards:
    (i) Quarantine and transfer for further examination. The wholesale
distributor must establish and maintain records for prescription drugs
retained in quarantine and subsequently transferred to a manufacturer
or regulatory or law enforcement agency for further additional physical
examination or laboratory analysis.
    (ii) Return the drugs. The wholesale distributor must establish and
maintain records for the return of prescription drugs to the
manufacturer, repackager, or wholesale distributor from which the
wholesale distributor acquired the drugs, including when returned using
a returns processor or reverse logistics provider to return the drugs.
    (iii) Destroy. When prescription drugs are authorized for
destruction, the wholesale distributor must:
    (A) Destroy all containers, labels, and packaging to ensure that
such items cannot be used in counterfeiting activities;
    (B) Ensure that the destruction of prescription drugs, containers,
labels, and packaging are witnessed; and
    (C) Establish and maintain records for destroyed drugs and the
witnessing thereof.
    (7) Preparation for foreseeable crises. The wholesale distributor
must prepare for, protect against, and address any reasonably
foreseeable crises that could affect security or operation of the
facility such as strike, fire, flood, or other natural disaster, or
other situations of local, State, or national emergency.

Sec.  205.27  Standards for the establishment and maintenance of
records of the distribution of prescription drugs.

    (a) Required records. Required records include, but are not limited
to, the following:
    (1) Documentation pertaining to distribution, including storage and
handling, security, inventory, transport, and shipping of prescription
drugs, including written policies and procedures for identifying,
recording, and reporting confirmed losses, thefts, and diversions, and
prescription drugs that are unfit for distribution;
    (2) All policies, procedures, instructions, contracts, data,
inspection reports, and any documentation related to compliance with
this subpart; and
    (3) Invoices, purchase orders, packing slips, shipping records, and
any other records of the distribution of prescription drugs.
    (b) Maintenance, availability, and accuracy of records. Records
must:
    (1) Accurately reflect the name of the wholesale distributor as it
appears on the wholesale distributor license and must match the
information that is reported to the Food and Drug Administration
pursuant to the Food and Drug Administration reporting requirements at
Sec.  205.29;
    (2) Be readily retrievable and made available to regulatory
authorities upon request;
    (3) Be securely stored and protected from unauthorized access or
modifications; and
    (4) Contain only alterations signed and dated by the individual who
made the alteration. Such alteration must preserve the original
information and document the reason for the alteration.
    (c) Written policies and procedures. Written policies and
procedures must be implemented by the wholesale distributor to protect
the integrity of records.
    (d) Record retention. (1) Except for the records listed in
paragraph (d)(2) of this section, all records required to be maintained
by this subpart must be retained for a period of 3 years.

    (2) Records of investigation of suspect and illegitimate products
and of destroyed, nonsaleable returned, and recalled prescription drugs
must be retained for a period of 6 years.

Sec.  205.28  Inspections.

    (a) A facility to be used in wholesale distribution must undergo a
physical inspection prior to issuance of the initial license by the
Federal or State licensing authority.
    (1) Where the State is the licensing authority, such inspection may
be conducted by:
    (i) The State in which the facility to be licensed is located; or
    (ii) A third-party accreditation or inspection service approved by
the State licensing the wholesale distributor; or
    (iii) If the facility is located out of State, the State issuing
the license may conduct the inspection or may accept an inspection by
the State in which the facility is located or by a third party, as
described in paragraph (a)(1)(ii) of this section.
    (2) Where the Food and Drug Administration is the licensing
authority, the Food and Drug Administration may conduct the inspection
or may accept an inspection conducted by an organization approved by
the Food and Drug Administration under Sec.  205.32.
    (b) Records described in Sec.  205.27 that are kept at the
inspection site or that can be immediately retrieved by computer or
other electronic means must be readily available for inspection during
the retention period. Records kept at a central location apart from the
inspection site and not electronically retrievable must be made
available for inspection within 2 business days of a request by a State
or Federal official, or sooner if necessitated by the duration of the
inspection.
    (c) Wholesale distributors must permit the appropriate Federal, or
State licensing authority and State- or FDA-approved third-party
inspection services to enter and inspect their premises and to audit
their records and written operating procedures.
    (d) To ensure compliance with this subpart, routine inspections
will be conducted once every 3 years by the licensing authority, or a
third-party accreditation or inspection service approved by the Food
and Drug Administration or the State licensing the wholesale
distributor.

Sec.  205.29  Requirements for initial and annual reporting to the Food
and Drug Administration.

    (a) Electronic reporting requirement. The wholesale distributor
must report electronically to the Food and Drug Administration using a
secure mechanism in a format the Food and Drug Administration can
review, process, and archive pursuant to section 503(e)(2)(A) of the
Federal Food, Drug, and Cosmetic Act. Information reported will be
included in the Food and Drug Administration's public database for
wholesale distributors pursuant to section 503(e)(2)(B) of the Federal
Food, Drug, and Cosmetic Act.
    (b) Reporting periods--(1) Initial reporting. Any entity that owns
or operates an establishment that engages in wholesale distribution
must report within 30 calendar days of obtaining an initial State or
Federal wholesale distributor license.
    (2) Annual reporting. Any entity that is licensed to engage in
wholesale distribution must report to the Food and Drug Administration
each calendar year between January 1 and March 31.
    (c) Required information. Information to be reported for each
wholesale distributor must include:
    (1) A complete list of States where the wholesale distributor is
licensed, including the corresponding identification number and the
expiration date of each such license;
    (2) Name of company as it appears on the license, full business
address, and contact information for the facility manager or designated
representative of the wholesale distributor;
    (3) All trade names or business names under which the wholesale
distributor conducts business; and
    (4) Any significant disciplinary actions by any State or Federal
Agency taken against the wholesale distributor license related to the
distribution of prescription drugs, including the State where the
disciplinary action occurred, date of final action, type of
disciplinary action, description of the violation, and documents
associated with the disciplinary action.
    (d) Timing of significant disciplinary action reporting--(1)
Initial reporting. The wholesale distributor must report to the Food
and Drug Administration any significant disciplinary actions, including
but not limited to revocation or suspension of a wholesale distributor
license by a State or Federal licensing authority, which occurred in
the 12 months prior to obtaining licensure.
    (2) Subsequent reporting. The wholesale distributor must, within 30
calendar days after a final action taken by a State or Federal
licensing authority, report significant disciplinary actions to the
Food and Drug Administration.
    (e) Other reports--(1) Closure of a facility. The wholesale
distributor must report to the Food and Drug Administration that a
facility has ceased operations within 30 calendar days after it has
stopped operating as a wholesale distributor.
    (2) Voluntary withdrawal of a State license. The wholesale
distributor must report to the Food and Drug Administration that it has
withdrawn its license in a State within 30 calendar days after such
withdrawal, including any reasons for the voluntary withdrawal of
licensure.

Sec.  205.30  Licensure denial, suspension, reinstatement, revocation,
and voluntary termination--notice and opportunity to request a hearing.

    (a) Denial of application for licensure. (1) The licensing
authority will refuse to approve a wholesale distributor license
application for any of the following reasons:
    (i) The methods or procedures to be used in the distribution of the
prescription drug, including receipt, storage, and handling, are
inadequate to preserve its safety, identity, strength, quality, or
purity.
    (ii) The facilities and controls used for the distribution of the
prescription drug, including receipt, storage, and handling, are
inadequate to preserve its safety, identity, strength, quality, or
purity.
    (iii) The methods or procedures to be used in the distribution of
the prescription drug, including receipt, storage, and handling, do not
comply with the requirements for good storage practices in Sec.
205.26.
    (iv) The personnel employed by the applicant do not meet the
requirements necessary for good storage practices in Sec.  205.25.
    (v) There is insufficient information in the written policies and
procedures required under Sec.  205.26(c) to determine whether the
methods or procedures to be used in the distribution of the
prescription drug, including receipt, storage, and handling, comply
with the requirements for good storage practices in Sec.  205.26 and
preserve the safety, identity, strength, quality, or purity of the
prescription drug.
    (vi) The methods or procedures to be used in the distribution of
the prescription drug, including receipt, storage, and handling, do not
comply with the requirements for adequate recordkeeping in Sec.
205.27.
    (vii) The application contains an untrue statement of material
fact.
    (viii) The applicant does not permit a properly authorized officer
or employee of the Food and Drug Administration, a State licensing
authority, or an AO approved by the Food and Drug Administration
pursuant to Sec.  205.32 an adequate opportunity to inspect the

facilities, controls, and any records relevant to the application.
    (ix) For renewal applications, the applicant fails to report to the
licensing authority any pertinent change of information required in
Sec.  205.21, Sec.  205.22, or Sec.  205.24.
    (x) For renewal applications, the applicant fails to report to the
Food and Drug Administration any of the requirements for annual
reporting in Sec.  205.29.
    (2) If review of a wholesale distributor's application fails to
demonstrate that the wholesale distributor meets the requirements for
licensure set forth in Sec.  205.22 and paragraph (a)(1) of this
section, the licensing authority will provide written notice to the
applicant that its license application may be denied, setting forth the
grounds for the denial and providing an opportunity to demonstrate that
the wholesale distributor meets the requirements for licensure.
    (3) The notice will inform the applicant of its right to provide
additional information and request reconsideration of the denial by the
licensing authority within 14 calendar days of the date of the
licensing authority's written notice.
    (4) If no reconsideration is sought, or, if upon reconsideration,
the licensing authority denies the applicant's request for licensure,
the licensing authority will provide the applicant written notice of
the denial and will provide the applicant notice of the opportunity to
request a hearing.
    (5) The applicant who wishes to request a hearing has 10 calendar
days after the date of the notice of denial to submit a written notice
of participation and request for a hearing. The applicant who fails to
submit a written notice of participation and request for a hearing
within 10 calendar days waives the opportunity for a hearing.
    (6) Parts 10 through 16 of this chapter apply to wholesale
distributor licenses issued by the Food and Drug Administration under
sections 503(e) and 583 of the Federal Food, Drug, and Cosmetic Act.
    (b) Suspension of license after notice and opportunity to request a
hearing. (1) The licensing authority may move to suspend a license if
the licensing authority has a reasonable belief that the licensee has
failed to comply with any of the standards for receiving and
maintaining licensure described in this subpart and that the nature of
the noncompliance at issue would likely compromise the quality of
product or threaten public safety.
    (2) The licensing authority will provide written notice of the
intent to suspend a wholesale distributor license setting forth the
grounds for the suspension pursuant to this part, including what
information would be required to demonstrate or achieve compliance. The
notice will inform the applicant of its right to provide additional
information, request reconsideration of the suspension by the licensing
authority, and demonstrate or achieve compliance before suspension.
    (3) Each wholesale distributor license holder has 30 calendar days
from the date of the notice of intent to suspend to present, in
writing, comments and information bearing on the initial decision.
    (4) If no comments or information is received within 30 calendar
days or, if upon reconsideration, the licensing authority believes the
wholesale distributor license should still be suspended, the licensing
authority will provide the wholesale distributor a second written
notice of the intent to suspend, informing the wholesale distributor of
the opportunity to request a hearing on the question of whether there
are grounds for suspension.
    (5) The wholesale distributor must submit a written notice of
participation and request a hearing in writing within 10 calendar days
after the date of the notice of the intent to suspend. A wholesale
distributor that fails to submit a written notice of participation and
request for hearing within 10 calendar days waives the opportunity for
a hearing.
    (6) Parts 10 through 16 of this chapter apply to wholesale
distributor licenses issued by the Food and Drug Administration under
sections 503(e) and 583 of the Federal Food, Drug, and Cosmetic Act.
    (7) If a wholesale distributor's license is suspended and the
wholesale distributor does not demonstrate or achieve compliance to the
licensing authority's satisfaction within the time period indicated in
the notice of suspension, the licensing authority will move to revoke
the wholesale distributor's license.
    (c) Immediate suspension of license. (1) The licensing authority
may suspend a license effective immediately if the licensing authority
reasonably believes that the licensee has failed to comply with any of
the standards for receiving and maintaining licensure described in this
subpart and that the nature of the noncompliance at issue would
reasonably be expected to cause an imminent threat to public health.
    (2) The licensing authority will provide the wholesale distributor
with written notice of immediate suspension of its license setting
forth the grounds for the suspension pursuant to this part, including
what information would be required to demonstrate compliance, and the
opportunity to request a hearing within 10 calendar days of the
wholesale distributor's request for such hearing.
    (3) The wholesale distributor must submit a written notice of
participation and request a hearing in writing within 10 calendar days
after the date of the written notice of immediate suspension. A
wholesale distributor that fails to submit a written notice of
participation and request for hearing within 10 calendar days from the
date of the written notice waives the opportunity for a hearing.
    (4) Parts 10 through 16 of this chapter apply to wholesale
distributor licenses issued by the Food and Drug Administration under
sections 503(e) and 583 of the Federal Food, Drug, and Cosmetic Act.
    (5) If a wholesale distributor's license is suspended and the
wholesale distributor does not demonstrate or achieve compliance to the
licensing authority's satisfaction within the time period indicated in
the notice of suspension, the licensing authority will move to revoke
the wholesale distributor's license.
    (d) Reinstatement of suspended licenses. The licensing authority
may reinstate a previously suspended license upon a wholesale
distributor's showing of compliance with requirements in this part and
upon such inspection and examination as the licensing authority may
require.
    (e) Revocation. (1) If compliance is not demonstrated or achieved
to the licensing authority's satisfaction within the time period
indicated in the notice of suspension, the licensing authority will
move to revoke the wholesale distributor's license.
    (2) The licensing authority will notify the wholesale distributor
of the intent to revoke the wholesale distributor's license, setting
forth the grounds for the revocation and offering an opportunity to
request a hearing on the proposed revocation.
    (3) The wholesale distributor must submit a written notice of
participation and request a hearing within 10 calendar days after the
date of the notice of revocation. A wholesale distributor that fails to
submit a written notice of participation and request for hearing within
10 calendar days waives the opportunity for a hearing.
    (4) Parts 10 through 16 of this chapter apply to wholesale
distributor licenses issued by the Food and Drug Administration under
sections 503(e)

and 583 of the Federal Food, Drug, and Cosmetic Act.
    (f) Nonrenewal. If a license renewal application is not submitted
by the date of expiration of the license, the license will be
considered expired. A wholesale distributor may not engage in wholesale
distribution with an expired license and must submit a new application
for licensure.
    (g) Voluntary termination of licensure upon request by the
wholesale distributor. The licensing authority will terminate a
wholesale distributor's license upon the wholesale distributor's
request, which will include a notice of intent to discontinue
prescription drug wholesale distribution and waive opportunity for a
hearing. A wholesale distributor that voluntarily terminates licensure
must obtain a new license before resuming wholesale distribution.
    (1) If a wholesale distributor that has had its license revoked
wishes to apply for a new license, the wholesale distributor must
submit a new license application, which may include an inspection if
required by the licensing authority under Sec.  205.28(a).
    (2) [Reserved]

Subpart D--Approved Organizations for Wholesale Distributors

Sec.  205.31  Use of approved third-party organizations.

    (a) A third-party organization that has been approved by the Food
and Drug Administration pursuant to Sec.  205.32 (``approved
organization'' (AO)) may be used to conduct initial and routine
inspections of the wholesale distributor's facility, as directed by the
Food and Drug Administration.
    (b) If an organization has been approved by the Food and Drug
Administration to conduct inspections, the AO must:
    (1) Complete inspections within a timeframe not to exceed 90
calendar days after receiving notice from the Food and Drug
Administration to conduct an inspection;
    (2) Based on the inspection, write a detailed document including a
summary of the AO's findings; and
    (3) Send the original document to the Food and Drug Administration,
with a copy to the wholesale distributor, within 7 calendar days of
completing the inspection.
    (c) To become an AO, and to maintain its approval, an organization
seeking the Food and Drug Administration's approval and current AOs
must:
    (1) Maintain records, including those that support the AO's initial
and continuing qualifications for approval, for a minimum of 5 years.
    (2) Maintain the following records of inspections submitted to the
licensing authority for a minimum of 5 years:
    (i) Copies of the records and supporting documentation reviewed as
part of an inspection;
    (ii) Inspection reports;
    (iii) Correspondence with the Food and Drug Administration and the
wholesale distributor associated with an inspection; and
    (iv) Information on the identity, conflict of interest
certification/compliance statement, and qualifications of all AO
personnel who contributed to the inspection.
    (3) Records maintained by the AO must:
    (i) Be readily retrievable and made available to Federal licensing
authorities upon request;
    (ii) Be secure from unauthorized access or modifications; and
    (iii) Contain only alterations signed and dated by the individual
who made the alteration. Such alteration must preserve the original
information and document the reason for the alteration.
    (4) An AO must immediately report to the Food and Drug
Administration the discovery of any evidence or observations of
potential violations found at a wholesale distributor facility during
an inspection of the facility that could pose imminent and serious
adverse health consequences or death to humans. Reports must be made in
the manner prescribed by the Food and Drug Administration.

Sec.  205.32   General qualifications of approved organizations.

    (a) To become and remain an AO, the organization and anyone
employed by the organization, including contractors used by the
organization:
    (1) Must not be a current Federal or State government employee;
    (2) Must not engage in prescription drug-related activities,
excluding participation in the Agency's AO program and related
activities, but including and not limited to manufacturing, wholesale
distribution, repackaging, relabeling, dispensing, or 3PL activities;
    (3) Must disclose to the Food and Drug Administration any
participation or financial interest in entities that participate in the
design, manufacture, promotion, or sale of articles or activities that
are predominantly Food and Drug Administration-regulated or are
expected to result in Food and Drug Administration-regulated articles;
    (4) Must not be owned or controlled by, or have any organizational,
material, or financial affiliation with, any of the entities engaged in
manufacturing, wholesale distribution, repackaging, relabeling,
dispensing, 3PL activities, or the design, manufacture, promotion, or
sale of prescription drugs as defined in section 581(12) of the Federal
Food, Drug, and Cosmetic Act;
    (5) Must enter and abide by a written agreement with the applicant
before data and information otherwise exempt from public disclosure may
be disclosed to the AO or the contractor;
    (6) Must operate in accordance with professional and ethical
business practices, which include:
    (i) Protecting against conflicts of interest as set forth in 5 CFR
part 2635 and 18 U.S.C. 208;
    (ii) Ensuring that the personnel employed or contracted by the AO
who are working on inspections have sufficient education, training,
knowledge, and experience to conduct inspections of wholesale
distributors;
    (iii) Protecting against unauthorized disclosure of nonpublic
information received, records, reports, and recommendations and
maintaining appropriate security and protection of such information;
    (iv) Maintaining appropriate security and protection, physical and
electronic, of any information received in relation to inspections;
    (v) Reporting information to the Food and Drug Administration and
entities for which licensure reviews were conducted that accurately
reflects data reviewed, inspectional observations made, and other
matters that relate to or may influence compliance with the Federal
Food, Drug, and Cosmetic Act; and
    (vi) Promptly responding to and attempting to resolve any
complaints regarding activities for which it is approved by the Food
and Drug Administration; and
    (7) Must establish and maintain policies, procedures, and
documentation to demonstrate that, at the time of application, and
throughout their tenure as an AO, the applicant has and can continue to
satisfy the requirements to qualify as an AO capable of assessing
compliance with all wholesale distributor requirements. Such policies,
procedures, and documentation must include, but are not limited to:
    (i) AO program administration;
    (ii) Disciplinary actions and corrective measures;
    (iii) Recordkeeping and confidentiality;
    (iv) Use of contractors; and
    (v) Personnel qualifications and ongoing training.
    (b) If an AO elects to use contractors for inspections, the AO
remains

responsible for the work of the contractors at all times.
    (1) AOs that use contractors to conduct inspections must have
policies and procedures in place to ensure the contractor's continuing
compliance with this part, as well as competence and qualifications to
conduct inspections. Such policies and procedures must ensure that
contractors:
    (i) Meet the qualifications set forth in paragraph (a) of this
section;
    (ii) Do not subcontract their inspection duties, and that
contractors are removed if such requirement is violated;
    (iii) Abide by the policies and procedures of the AO, as set forth
in Sec.  205.33(b); and
    (iv) Complete and pass the same training required by the AO, as set
forth in Sec.  205.33(c).
    (2) If an AO elects to use contractors to conduct inspections, the
AO must receive and keep a record of written consent from the wholesale
distributor to share confidential commercial information with
contractors for which an inspection is being conducted.
    (3) AOs that elect to use contractors must submit to the Food and
Drug Administration a list of contractors used by the organization,
accompanied by a statement from the organization certifying that such
contractors meet the requirements of this subpart.

Sec.  205.33  Process and procedures for approval by the Food and Drug
Administration.

    (a) Application. An application to become an AO must be completed
and submitted electronically to the Food and Drug Administration in a
format the Food and Drug Administration can renew, process, and
archive.
    (b) Required application information. Policies, procedures, and
documentation as required by Sec.  205.32(a)(7) must accompany the
application.
    (c) Training. Organizations must provide training and any
individual who conducts inspections or supervises individuals who
conduct inspections is required to undergo and pass the prescribed
training.
    (1) If an individual does not pass training, that person must wait
30 days before retaking the training, and may be required to show proof
of additional education or experiential learning to demonstrate
competence before retaking the training evaluation.
    (2) To maintain approval, individuals employed by the AO and
conducting inspections or supervising those who conduct inspections
must undergo and pass annual training as prescribed by the Food and
Drug Administration. Failure to complete and pass annual training may
result in suspension of approval.
    (3) The Food and Drug Administration may require additional
training. If such additional training is required, AOs will be given a
set time period during which training must be completed and passed to
maintain approval.
    (d) Auditing. Prior to conducting its first inspection, an AO must
undergo an onsite audit by the Food and Drug Administration. The Food
and Drug Administration may also conduct random, periodic audits, as
well as for-cause audits, of an AO, as set forth in paragraph (o) of
this section.
    (e) Duration of approval and renewal process. (1) The Food and Drug
Administration approval to conduct inspections is valid for a period of
5 years.
    (2) AOs must submit a renewal application to the Food and Drug
Administration no later than 6 months prior to the expiration date to
renew its approval.
    (i) If a renewal application is submitted less than 6 months before
the date of expiration, the AO's approval will expire if approval is
not renewed prior to the date of expiration.
    (ii) Upon expiration of the AO's approval, the AO must cease
conducting any inspection-related activities.
    (f) Denial of approval. If an organization does not meet all of the
Food and Drug Administration's standards detailed in Sec. Sec.  205.31
and 205.32 for becoming an AO, the Food and Drug Administration will
deny the application in writing. Requests for review and
reconsideration of a denial of an application must be submitted to the
Food and Drug Administration within 30 calendar days of the date of the
Food and Drug Administration's decision. If, upon reconsideration, the
licensing authority denies the applicant's request for approval, the
licensing authority will provide the applicant written notice of the
denial and an opportunity to appeal pursuant to Sec.  10.75 of this
chapter.
    (g) Suspension of approval after notice and opportunity to request
a hearing. (1) The Food and Drug Administration may suspend approval of
an organization after opportunity to request a hearing when there is a
reasonable probability that the organization's noncompliance will
negatively impact public health.
    (2) If an AO fails to maintain the Food and Drug Administration's
standards pursuant to Sec. Sec.  205.31 and 205.32, the Food and Drug
Administration will give written notice of the intent to suspend the
organization's approval, including the grounds for the suspension, and
the AO will have 30 days after the date of the notice to provide
additional information to the Food and Drug Administration for
reconsideration.
    (3) If no additional information is provided or, if upon
reconsideration, the Food and Drug Administration still believes the
AO's approval should be suspended, the Food and Drug Administration
will issue the AO a formal written notice of intent to suspend, along
with notice of the opportunity to request a hearing pursuant to part 16
of this chapter.
    (4) An AO that wishes to request a hearing has 10 calendar days
after the date of the formal notice of intent to suspend to submit a
written notice of participation and request for a hearing. An AO that
fails to submit a written notice of participation and request for a
hearing within 10 calendar days from the date of the notice waives the
opportunity for a hearing.
    (5) A suspended AO must notify any wholesale distributors with a
pending inspection to be performed by the AO of the AO's suspension
within 7 calendar days.
    (h) Immediate suspension of approval. (1) When there is a
reasonable probability that the organization's noncompliance will cause
imminent and serious adverse health consequences or death to humans,
the Food and Drug Administration will suspend an AO's approval
effective immediately.
    (2) In such a situation, the Food and Drug Administration will
provide the AO a written notice of immediate suspension, along with
notice and opportunity to request a hearing pursuant to part 16 of this
chapter within 14 calendar days of the AO's request for such hearing.
    (3) An AO that wishes to request a hearing has 10 calendar days
after the date of the formal notice of suspension to submit a written
notice of participation and request for a hearing. An AO that fails to
submit a written notice of participation and request for a hearing
within 10 calendar days waives the opportunity for a hearing.
    (i) Reinstatement of approval. (1) An organization's approval may
be reinstated if the Food and Drug Administration determines that the
suspended organization has rectified the issues leading to the
suspension and can meet the standards set forth in this subpart.
Pursuant to this paragraph (i), the organization must rectify the
issues and come into compliance with the Food and Drug Administration's

standards within 1 year from the date of suspension. If the issues have
not been rectified within 1 year, the Food and Drug Administration may
revoke the AO's approval subject to the provisions of this part.
    (2) An organization whose approval has been reinstated on a
conditional basis will be subject to a 3-year probationary period, and
if any material deficiencies arise during that period, the
organization's approval may be revoked.
    (j) Revocation of approval. (1) The Food and Drug Administration
may revoke approval of an organization whose approval has been
suspended pursuant to paragraphs (g) and (h) of this section:
    (i) If an organization fails to demonstrate intent to comply with
the issues leading to the suspension within 6 months from the date of
suspension; or
    (ii) If the Food and Drug Administration determines that the
organization failed to rectify the issues leading to the suspension to
the Agency's satisfaction within 1 year of the date of suspension.
    (2) The Food and Drug Administration will give written notice of
the intent to revoke the organization's approval, including the grounds
for the revocation, and an opportunity to request a hearing pursuant to
part 16 of this chapter.
    (3) The AO must submit a written notice of participation and
request a hearing within 10 calendar days after the date of the notice
of revocation. An AO that fails to submit a written notice of
participation and request for hearing within 10 calendar days waives
the opportunity for a hearing.
    (4) An organization whose approval is revoked that wishes to
reapply to be an AO must submit a new application to the Food and Drug
Administration.
    (k) Requests for reconsideration of Agency decision. (1) The Food
and Drug Administration will follow the process outlined at Sec.  10.75
of this chapter to review matters relating to denial of approval,
including review of the organization's application.
    (2) The Food and Drug Administration will follow the process
outlined at part 16 of this chapter to review matters relating to a
suspension or revocation action, including review of the organization's
application and administrative file.
    (3) The Food and Drug Administration's decision after request for
reconsideration of denial, suspension, or revocation constitutes a
final Agency action under 5 U.S.C. 702.
    (l) Voluntary withdrawal of approval. (1) An organization wishing
to voluntarily withdraw its approval, including but not limited to when
an AO goes out of business, must notify the Food and Drug
Administration in writing at least 6 months prior to the date the
organization intends for the withdrawal to become effective.
    (i) If an AO determines it will be withdrawing its approval with
the Food and Drug Administration in less than 6 months, it must notify
the Food and Drug Administration immediately of its intent to withdraw,
and such notification must inform the Food and Drug Administration of
the date the organization will cease business operations.
    (ii) [Reserved]
    (2) No later than 7 calendar days after notifying the Food and Drug
Administration, the organization must notify any facilities with
pending inspections that it intends to withdraw its approval with the
Food and Drug Administration and must provide the date on which the
withdrawal is effective.
    (m) AO-required notifications to wholesale distributors. The AO
must, within 7 calendar days of the date of suspension, revocation, or
voluntary withdrawal of approval, notify those wholesale distributor
facilities that have pending inspections of the AO's suspension or
revocation. This notification must inform the wholesale distributor
facility that it must apply for inspection with another AO, or the Food
and Drug Administration if no other organization is approved.
    (n) Change of operation or ownership. (1) The AO must report to the
Food and Drug Administration within 30 calendar days any changes to the
information submitted with its application for approval.
    (2) Approval is not transferable.
    (i) Changes in ownership of an AO require the organization to
submit a new application to the Food and Drug Administration.
    (ii) Such application must be submitted to the Food and Drug
Administration no later than 30 calendar days prior to the date of the
change of ownership.
    (iii) No later than 30 calendar days before the date of the change
of ownership, the AO must notify any wholesale distributor facilities
with pending applications of the pending change in ownership.
    (iv) On the date the change of ownership takes place, the original
approval is void.
    (o) Monitoring by the Food and Drug Administration. (1) AOs are
subject to both periodic and for-cause audits by the Food and Drug
Administration to ensure compliance with the Food and Drug
Administration's requirements for approval in this part.
    (2) If an AO refuses to cooperate with the Food and Drug
Administration's audit, the organization's approval may be suspended.

    Dated: January 24, 2022.
Janet Woodcock,
Acting Commissioner of Food and Drugs.
[FR Doc. 2022-01929 Filed 2-3-22; 8:45 am]
BILLING CODE 4164-01-P