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Florida compounding pharmacies should be aware the DEA's Five Percent Rule for in-office use does not apply in Florida and that they must comply with more-stringent restrictions of Florida law.

What is “wholesale distribution”?

Generally, “wholesale distribution” is the provision of a drug product (whether commercially available or not) to an individual who is not the ultimate user. For example, providing a compounded product for resale to third parties could be construed as a form of wholesale distribution. Another form of wholesale distribution is providing a prescription drug to physicians for so-called “in-office use.” It is well settled that pharmacies are permitted to legally dispense prescription medication pursuant to a prescriber’s valid prescription for a specific and identifiable patient. “In-office use” involves distributing a product to a physician office without a presently identifiable patient, but for the physician to use when treating future patients. A third and more remote situation of wholesale distribution might be dispensing samples of compounded products to healthcare providers.

Is a special license required for wholesale distribution?

States generally prohibit wholesale distribution unless the pharmacy obtains a separate wholesale distributor license. Engaging in wholesale distribution without the proper licensure (unlicensed wholesale distribution) or without falling within a recognized legal exception (see below) can result in disciplinary action against the pharmacy license, including monetary fines, reprimands, suspensions, and even license revocation in extreme cases.

In situations where samples are being dispensed, a pharmacy board may even require the pharmacy entity be licensed as a manufacturer with the federal Food and Drug Administration before providing such samples. Some states (Florida, for example) require separate state licensure to dispense samples. See Fla. Stat. 499.028.

Are there legal exceptions that allow a pharmacy to do limited wholesale distribution without a separate wholesale distributor’s license?

Historically, both state and federal laws have permitted a limited amount of wholesale distribution for in-office use. Notably, the federal government and various states have different requirements in this area of the law.

At the federal level, the Drug Enforcement Administration (DEA) recognizes a five percent limited exception to the ban on unlicensed wholesale distribution. The so-called “Five Percent Rule” allows any pharmacy (including a compounding pharmacy) to distribute controlled substances without possessing a wholesale distributor license as long as the quantity of units distributed is limited to five percent of all controlled substances produced by the pharmacy in a given year. See 21 C.F.R. 1307.11. Many states model their laws after the DEA Five Percent Rule and provide for similar safe harbors.

Does Florida law contain an in-office use exception?

Although Florida law contains a limited in-office use exception, Florida does not recognize a Five Percent Rule for unlicensed wholesale distribution. As a result, compliance with the DEA Five Percent Rule does not insulate a Florida compounding pharmacy from state regulatory sanctions.

Florida recently revised its limited in-office use exception. See Fla. Admin. Code R. 64B16-27.700(3). As of March, 21, 2013, Florida in-office use applies only to patient-specific compounding. As modified, the exception now requires the pharmacy to enter into a written agreement with the healthcare provider, maintain separate records of its in-office use activities and specially label compounds distributed for in-office use. See Fla. Adm. Code R. 64B16-27.700. Florida’s requirements are summarized below.

  1. Written agreement: The compounding pharmacy and the practitioner must enter into a written agreement which provides:
    • The compounded drug may only be administered to the patient listed in the prescription, and may not be dispensed to the patient or sold to anyone else
    • The practitioner must record on the patient’s chart the lot number and beyond-use date of the compounded drug
    • The practitioner must provide the patient with a means to report complaints or adverse reactions to facilitate recalls
  2. Record-keeping: In addition to requiring a written agreement between the pharmacy and the healthcare provider, the updated regulation requires that the pharmacy maintain readily retrievable records for four years of all compounded drugs ordered for office use.
  3. Labeling: The regulation further requires the pharmacy to affix a label to any compounded drug, which must include:
    • The pharmacy’s name, address and phone number
    • A list of active ingredients and their strength
    • The pharmacy’s lot number and beyond use date
    • The quantity in the container
    • The appropriate notices, including instructions for storage, cautionary statements, or hazardous drug labels
    • The statement “For institutional or office use only – not for resale.”

For more information, please contact:

Bruce E. Reinhart

Ned Milenkovich

Jeremy R. Bloor

We understand the drug and pharmacy sector. Our attorneys have extensive knowledge of all segments of the drug supply chain and assist manufacturers, distributors, retailers, and pharmacy benefit managers in all facets of legal representations including regulatory, transactional, government investigation, and litigation matters.