Maryland Bill Would Place Wholesale Distributors in Catch-22 with DEA Suspicious Order Requirements

March 9, 2014

By John A. Gilbert, Jr. & Larry K. Houck

A bill introduced in the Maryland House of Delegates, HB 0596, would require wholesale distributors to notify their pharmacy customers at least thirty days prior to “imposing a limit on the quantity” of prescription drugs or devices distributed to the pharmacy.  The bill would further require wholesale distributors to provide updates, at least weekly, on the quantity of the drug or device available to the pharmacy while a limitation is in effect. 

The bill is likely intended to assist pharmacies in managing inventories and avoid potential shortages for their patients, however, it would create significant hardships for distributors to anticipate shortages related to manufacturer availability.  For example, a wholesale distributor may not know a month out that it may not have adequate drug or device inventory for sale to pharmacy customers.  In addition, the bill, if enacted, would create potential conflicts with Drug Enforcement Administration (“DEA”) regulations that require distributors, manufacturers and other registrants to design and operate a system to disclose suspicious controlled substance orders and to report such orders to the local DEA office.  21 C.F.R. § 1301.74(b).  Suspicious orders include orders of unusual size, orders that deviate substantially from a normal pattern and orders of unusual frequency.  Id. 

In order to comply with DEA’s current interpretation and enforcement of this regulation, most distributors have designed systems to include “thresholds” or limits as part of a program to identify, review, evaluate and report suspicious orders.  Moreover, once a distributor has identified a suspicious order, they are obligated to report this order to DEA and, logically, should not fill this order (or future orders for controlled substances) until these issues are resolved.  Distributors also may not want to disclose the thresholds or specific components of their compliance systems to customers to avoid customers attempting to circumvent the limits.  Therefore, decisions by distributors to report and not fill orders as required by DEA regulations could violate the proposed Maryland bill’s thirty day notification requirement.

The proposed legislation warrants monitoring and will need to be amended to resolve conflicts with federal law.  As of January 2014, there were 978 wholesale distributors licensed by Maryland.