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113. The Prescription Drug Marketing Act

The Prescription Drug Marketing Act ("PDMA") was enacted in 1988 to address certain prescription drug marketing practices that have contributed to the diversion of large quantities of such drugs into a secondary grey market. These marketing practices -- including the distribution of free samples, the use of coupons redeemable for drugs at no cost or low cost, and the sale of deeply discounted drugs to hospitals and health care entities -- have helped fuel a multi-million dollar drug diversion market that provides a portal through which mislabeled, subpotent, adulterated, expired, and counterfeit drugs are able to enter the nation's drug distribution system.

The PDMA is incorporated into the FDCA, and proscribes a variety of conduct set forth in the FDCA's "prohibited acts" section at 21 U.S.C. § 331(t). The penalties for these offenses are set forth at 21 U.S.C. §§ 333(a) & (b).

The most simple and straightforward of the acts prohibited by the PDMA is knowingly selling, purchasing, or trading, or offering to sell, purchase, or trade a prescription drug sample. See 21 U.S.C. § 353(c)(1). This offense is punishable by up to ten years imprisonment. See 21 U.S.C. § 333(b)(1)(B). Sample charging documents are included in this manual at 114 Civil Resource Manual at 114 and 115 Civil Resource Manual at 115.

Many of the other PDMA provisions are somewhat more complex. For instance, the statute prohibits the resale of any prescription drug that was previously purchased by a hospital or other "health care entity." See 21 U.S.C. § 353(c)(3)(A). This provision was intended to eliminate a major source of drugs in the diversion market -- namely, drugs that were originally purchased by health care institutions or providers at substantially discounted prices. Congress believed that the resale of such drugs constituted an unfair form of competition that had an adverse impact upon scrupulous drug wholesalers and retailers and provided a steady stream of inventory for the diversion market.

The provision, however, contains a host of exemptions, and further defines "health care entity" to exclude "a wholesale distributor of drugs or a retail pharmacy licensed under State law." See 21 U.S.C. § 353(c)(3)(A). Due to the statute's complexity and potential loopholes, prosecution of institutional diversion cases under the PDMA has been rare. More commonly, such cases are brought as mail or wire fraud prosecutions under Title 18. See, e.g., United States v. Costanzo, 4 F.3d 658 (8th Cir. 1993). Nevertheless, a sample Information charging the PDMA offense is included in this manual at 116 Civil Resource Manual at 116.

Another key provision of the PDMA requires that drug wholesalers, prior to distributing any prescription drug, provide the purchaser with a statement of origin identifying all prior sales of the drug, including the dates of the transactions and all parties thereto. See 21 U.S.C. § 353(e)(1). This provision, which does not apply to the drug's manufacturer and its authorized distributors, is intended to insure that all prescription drugs in commercial channels are accompanied by a paper trail and can be traced, if need be, in the event of a recall or for any other reason. Violation of this requirement is a misdemeanor. See 21 U.S.C. § 333(a)(1). However, if the offense is committed with the intent to defraud or mislead (including the intent to defraud or mislead the FDA) the offense is a felony. See 21 U.S.C. § 333(a)(2). A sample Information charging this offense is included in this manual at 117 Civil Resource Manual at 117.

Other proscribed practices under the PDMA include: (a) the sale, purchase, trade, or counterfeiting of prescription drug coupons (i.e. coupons redeemable for free or low-cost prescription drugs), see 21 U.S.C. § 353(c)(2); (b) the wholesale distribution of prescription drugs in interstate commerce without a state license, see 21 U.S.C. § 353(e)(2); and (c) the reimportation of exported prescription drugs by anyone other than the drug's manufacturer, see 21 U.S.C. § 381(d)(1).

[cited in USAM 4-8.230]

Updated May 20, 2015