The UDI Rule: Are Private Label Distributors to be Considered Labelers?

August 18, 2016

By Jennifer D. Newberger

Though the UDI compliance date for Class II devices is just over one month away, one key question remains unanswered: are private label distributors “labelers” for purposes of the UDI rule? This turns out to be much less clear-cut than it might seem. FDA has publicly stated that they are, without providing any supporting rationale for its position. The original economic impact analysis to support the final rule, however, paints a very different picture.

The UDI regulation defines a “labeler” as a person who “causes” a label to be applied to a device. FDA notes that the labeler is usually the manufacturer, but takes the position that it also may include specification developers, repackagers, or relabelers. See 78 Fed. Reg. 58786, 58787 (Sept. 24, 2013).

Neither the rule nor the preamble to the rule specifically addresses the role of private label distributors. Private label distribution is common in the medical device industry. Companies often contract with a third party to have their name and brand on the label of a device over which they do not exercise control. The private label distributor does not own the 510(k), is not the specification developer, does not repackage or relabel, and does not manufacture the product. Therefore, private label distributors are not “manufacturers” subject to FDA regulation and are not required to register with FDA under 21 C.F.R. Part 807.

In informal advice, FDA officials have expressed the view that private label distributors are “labelers” required to comply with the UDI rule. For example, in a RAPS Regulatory Exchange Open Forum on July 8, a commenter posted a response received from FDA’s UDI Help Desk regarding private label distributors. The response stated, in relevant part:

Example 2: Company A manufactures a device under contract with Company B.  As part of the contract, Company A places the label with Company B's brand on the immediate container of the device.  Company B, as the private label company, is the labeler. Company A as the contract manufacturer or the contract packaging company, is not the labeler for purposes of UDI compliance.  However, UDI Rules allow third parties to submit GUDID.  Therefore, Company B can contract with Company A and authorize Company A to open a GUDID account on behalf of Company B and to submit the required information.

Example 3:  Company A manufactures a device and commercially distributes the device under its own brand.  Company A also manufactures the same version or model of the device under contract with Company B, Company C, and Company D.  As part of the contract, Company A places the label with Company B, C, or D's brand, respectively, on the immediate container of the device.  Company A, B, C, and D are all labelers and required to submit information pertaining to their respective brands to GUDID.  In addition, despite the fact that the devices are all the same version or model, each brand is required to have its own UDI. . . .

Along the same lines, our firm asked the Help Desk whether private label distributors are “labelers” for UDI purposes. We received the following response:

In general, our current position is that where the name and place of business of the private label distributor is on the device label to meet the requirements of 21 CFR 801.1, the private label distributor is the labeler for UDI purposes.

To our knowledge, FDA has not publicly cited a rationale for this position. We have learned that one basis for the position that private label distributors are labelers for UDI is that the concept of labeler for UDI was borrowed from its use in the drug space, although this position was not publicly articulated during the course of the rulemaking. The idea is that the manufacturer of a product—be it a drug or device—for a party may change over time, and neither party may want to publicly divulge that relationship. Therefore, the labeler is essentially the “public face” of the product.

Though this position is not without merit, private label distributors still find themselves in something of a bind—their obligations under the UDI rule were not clearly discussed in either the proposed or final rule, and they now find themselves responsible for regulatory obligations for which most are unprepared. Moreover, this position appears to be contrary to what FDA told the public during the UDI rulemaking. For instance, FDA’s economic impact report relies upon an analysis developed by Eastern Research Group, Inc. (ERG). See Unique Device Identification System; Final Rule, Docket No. FDA-2011-N-0090, Final Regulatory Impact Analysis, Final Regulatory Flexibility Analysis, Unfunded Mandates Reform Act Analysis. The ERG report includes a section, “Profile of the Affected Entities,” that discusses the entities considered to be labelers:

Based on FDA’s definition of labeler in the proposed rule [which is the same as that in the final rule], the affected entities are expected to include manufacturers, single-use device reprocessors (which take single use devices, sterilize them, and return them to the end user), specification developers (who oversee the manufacture of devices by contract manufacturers), and relabelers/repackagers (R/Rs).

May 2012 ERG Report, at 3-1. The May 2012 report also includes the following table (emphasis added):

Both the language from the ERG report and the table above indicate that the only entities that meet the definition of a labeler are those that are required to register with FDA as the specified types of medical device establishments in the table above. It is clear from the ERG report that the table above was intended to be a complete list of all “affected entities,” i.e., labelers. Notably absent from the list are private label distributors.

In fact, the only discussion of private label distributors in the ERG report specifically excludes those entities from the definition of a labeler:

Some specification development is done under the specification developer’s brand; other times, specification developers are contracted by private label distributors to provide the specifications and coordinate the manufacturing of the device to those specifications. Distributors are not allowed to list devices in FDA’s database, however, and do not keep the device records. In the first case, where the specification developer and the contract manufacturer are the only parties involved, we assume that the costs of labeling are ultimately borne by the specification developer. In the second case, where a third party private labeler is involved, it is still assumed that the specification developer is the UDI labeler of record and incurs the immediate costs of any UDI requirements. Some of these costs might be passed to the third-party private labeler or the labeler might handle the actual label application and thereby incur costs. Nevertheless, we assume that the specification developers bear the costs and impacts because there is no way to clearly determine the extent of third-party interactions.

May 2012 ERG Report, at 3-13 (emphasis added).

Thus, in addressing the situation where there is a specification developer and a private labeler, ERG expressly allocated the UDI compliance costs to the specification developer—not the private label distributor. In its own cost analysis, FDA does not specifically mention private label distributors, but accepts the analysis provided by ERG.

We understand that it is FDA’s position that most of the costs for UDI compliance will in fact be borne by the manufacturer or specification developer, and not the private label distributor, since most of the costs associated with compliance relate to label printing. Under this view, the economic impact report is correct in stating that the costs of UDI compliance will be borne by the manufacturer or specification developer. The flaw in this argument, however, rests with the actual words in the report—not only does it say that costs will be borne by the specification developer, it also says that the “specification developer is the UDI labeler of record.” If costs could be separated out from UDI labeler of record, that should have been specified. But it was not, and the economic report therefore is clear that private labeler distributors do not bear the costs associated with UDI compliance, nor are they the “UDI labeler of record.”

Based upon the language of the proposed rule, private label distributors had no reason to believe that they would be subject to UDI regulatory obligations. If FDA believed that private label distributors were subject to the UDI regulation, the agency should have said so explicitly. FDA’s subsequent application of UDI regulations has therefore come as quite a surprise, and without input from this large segment of industry. FDA should remedy this situation by publicly renouncing its position that private label distributors are “labelers” for purposes of the UDI rule.

We would finally note that this is just one of the many confounding aspects of the UDI regulation. FDA may have initially thought the UDI rules were straightforward. They are not. A recent report found that “just 15% of respondents indicate that they are already compliant with the next phase of the regulation, and of those who are currently working towards compliance, nearly 40% will be taking it right to the due date of Sept. 24th.” Taking the Pulse of UDI Compliance, A Survey of the Medical Device Industry on Compliance and Labeling.  With that September 24 compliance date looming, it may be too late to fix the multiple ambiguities of the UDI regulation. However, the UDI regulation should stand as an abject lesson in the need for greater clarity whenever CDRH considers imposing a major new regulatory obligation.

Categories: Medical Devices