DEA Temporarily Removes the ‘Five Percent Rule’
Health & Life Sciences Alert 04/16/20 Edward D. Rickert, Hunter G. DeKoninck, Christopher T. Dang
Through an April 13, 2020 letter to registered practitioners, the Drug Enforcement Administration (DEA) announced that, effective January 1, 2020, and until the end of the Department of Health and Human Services' (HHS) public health emergency declaration, DEA-registered practitioners are exempt from limitations imposed by the "five percent rule." Ordinarily, the "five percent rule" permits practitioners to distribute controlled substances to other practitioners without requiring the originating practitioner to be registered as a distributor; however, importantly, the amount distributed may not exceed five percent of the total number of dosage units dispensed and distributed by the practitioner during the calendar year (21 CFR §1307.11). Should a practitioner exceed the five percent threshold, it must register with DEA as a distributor. Generally, this rule is intended to maintain differentiation between registrant types, such as manufacturer, distributor, and dispenser (practitioner). Thus, DEA's temporary removal of the five percent rule now grays historically bright-line distinctions between distributor and dispenser—at least until the end of the COVID-19 crisis.
The apparent intent of DEA's new five percent exception (as with many other of its recent changes) is to address persistent demand challenges in a COVID-19 world by further eliminating barriers of access to controlled substances necessary to meet patient needs. For practitioners who have not frequently utilized the five percent rule and who wish to now engage in distribution activities in light of DEA's exception, it is critical to ensure compliance with DEA's requirements surrounding distribution activities, such as Form 222 requirements and obligations to identify suspicious orders and to guard against diversion, theft, and in-transit losses. Engaging in distribution activities without the effective controls necessary to satisfy DEA's distributor-related regulatory requirements could create significant regulatory issues for practitioners.
It is also important to note that while addressed to all DEA-registered practitioners, DEA's letter specifically speaks to "some DEA-registered practitioners (dispensers), such as hospitals, pharmacies and physicians" who stand on the front lines in combatting inventory and supply concerns. It is unclear whether DEA has similar supply concerns for practitioners whose practice is unrelated to the treatment of COVID-19 treatment (e.g., dentists, veterinarians, etc.); however, the exception appears to uniformly extend across the entire populace of DEA-registered practitioners. Nevertheless, out of an abundance of caution, practitioners who do not practice in industries that treat COVID-19 patients (which especially benefit from the easing of supply restraints) should carefully evaluate whether it is appropriate to participate in this exception or, at a minimum, whether they are equipped to participate in this exception.
Lastly, practitioners should consult with counsel to evaluate whether their home state's wholesale distribution and, where applicable, state controlled substance agency statutes, regulations, and emergency declarations allow such distributions. The statutes, regulations, and emergency declarations of the recipient's state should also be reviewed as well. State requirements may still differ from the DEA's temporarily position.
Find Answers to COVID-19 Issues, Impacts and Recommendations from Quarles & Brady.
Quarles & Brady's Health Law Team is continuously monitoring the COVID-19 pandemic, and we are here to help. For more information on how this affects your business, contact your Quarles & Brady attorney or: