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Executive Summary

ASHP ON DIVERSION: HOSPITAL RETURNS ARE "HIGHLY INADVISABLE," the association is advising its members in a preliminary memorandum on the Drug Division Act, which went into effect July 21. "Until the issue [of whether the law prohibits hospital returns as resales] is clarified, we believe that returns to a wholesaler or a manufacturer are highly inadvisable because of the severe criminal penalties that may result from those actions," the American Society of Hospital Pharmacists said. Until FDA regulations clarify the issue, the question of how normal product returns are handled under the law "is one of the most difficult situations that hospitals are facing," the memo states. "Although neither ASHP nor key legislative players believe that it was intended by Congress nor consistent with a reasonable interpretation of the law, FDA and others are looking at the literal language of the law [i.e., its ban on nonprofit institutions' resales and trade of pharmaceuticals obtained at a discount] as prohibiting all returns," the association noted. ASHP said it "is actively working to secure relief through the regulatory, law enforcement, and legislative process." The association has previously contended that normal returns are exempt from the law's ban. Specifically, the memo continues, "ASHP is engaged in efforts to convince the FDA that its regulatory initiatives must be sensitive to the problems of the hospitals." On the legislative front, the association said it has "been working with Congress to increase its awareness of the problem and to try to seek some technical legislative relief if it becomes necessary." In addition, ASHP said it has been working with other federal agencies and other associations, including the American Hospital Association. The prohibition on resales and trades was prompted by evidence presented in Justice Department and congressional investigation that hospitals and other nonprofit institutions purchase pharmaceuticals at little or no cost and resell them at large profits. However, House Commerce/Oversight Subcommittee Chairman Dingell (D-Mich.) told ASHP the law "was never intended to, nor in fact does it, prevent legitimate returns by a hospital" ("The Pink Sheet" May 30, p.10).

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