7. SECTION 5 OF ORPHAN DRUG ACT1

GRANTS AND CONTRACTS FOR DEVELOPMENT OF DRUGS FOR RARE
DISEASES AND CONDITIONS

SEC. 5. (a) [21 U.S.C. 360ee] The Secretary may make grants
to and enter into contracts with public and private entities and
individuals to assist in (1) defraying the costs of qualified testing
expenses incurred in connection with the development of drugs for
rare diseases and conditions, (2) defraying the costs of developing
medical devices for rare diseases or conditions, and (3) defraying
the costs of developing medical foods for rare diseases or condi-
tions.

(b) For purposes of subsection (a):

(1) The term "qualified testing" means-

(A) human clinical testing-

(i) which is carried out under an exemption for a
drug for a rare disease or condition under section
505(i) of the Federal Food, Drug, and Cosmetic Act (or
regulations issued under such section); and

(ii) which occurs after the date such drug is des-
ignated under section 526 of such Act and before the
date on which an application with respect to such drug
is submitted under section 505(b) of such Act or under
section 351 of the Public Health Service Act; and

(B) preclinical testing involving a drug for a rare dis-
ease or condition which occurs after the date such drug is
designated under section 526 of such Act and before the
date on which an application with respect to such drug is
submitted under section 505(b) of such Act or under sec-
tion 351 of the Public Health Service Act.

(2) The term "rare disease or condition" means (1)2 in the
case of a drug, any disease or condition which (A) 2 affects less
than 200,000 persons in the United States, or (B) 2 affects more
than 200,000 in the United States and for which there is no
reasonable expectation that the cost of developing and making
available in the United States a drug for such disease or condi-
tion will be recovered from sales in the United States of such
drugs, (2) 2 in the case of a medical device, any disease or con-
dition that occurs so infrequently in the United States that
there is no reasonable expectation that a medical device for
such disease or condition will be developed without assistance
under subsection (a), and (3)2 in the case of a medical food,
any disease or condition that occurs so infrequently in the

1 Public Law 97-414.

2 So in law. See section 3 of Public Law 100-290 (102 Stat. 90). In subsection (b)(2) above,
the organizational units (1), (2), and (3) probably should be (A), (B), and (C) (and in the unit
(1), (A) and (B) probably should be (i) and (ii)).

United States that there is no reasonable expectation that a medical food for such disease or condition will be developed without assistance under subsection (a). Determinations under the preceding sentence with respect to any drug shall be made on the basis of the facts and circumstances as of the date the request for designation of the drug under section 526 of the Federal Food, Drug, and Cosmetic Act is made.

(3) The term "medical food" means a food which is formulated to be consumed or administered enterally under the supervision of a physician and which is intended for the specific dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation.

(c) For grants and contracts under subsection (a), there are authorized to be appropriated such sums as already have been appropriated for fiscal year 2002, and $25,000,000 for each of the fiscal years 2003 through 2006.

(d) REGULATION OF RETAIL SALES.—
(1) PSEUDOEPHEDRINE.—
(A) LIMIT.-

(i) IN GENERAL.-Not sooner than the effective date of this section and subject to the requirements of clause (ii), the Attorney General may establish by regulation a single-transaction limit of 24 grams of pseudoephedrine base for retail distributors. Notwithstanding any other provision of law, the single-transaction threshold quantity for pseudoephedrine-containing compounds may not be lowered beyond that established in this paragraph.

(ii) CONDITIONS.-In order to establish a singletransaction limit of 24 grams of pseudoephedrine base, the Attorney General shall establish, following notice, comment, and an informal hearing that since the date of enactment of this Act there are a significant number of instances where ordinary over-the-counter pseudoephedrine products as established in paragraph (45) of section 102 of the Controlled Substances Act (21 U.S.C. 802(45)), as added by this Act, sold by retail distributors as established in paragraph (46) in section 102 of the Controlled Substances Act (21 U.S.C. 802(46)), are being widely used as a significant_source of precursor chemicals for illegal manufacture of a controlled substance for distribution or sale.

(B) VIOLATION.-Any individual or business that violates the thresholds established in this paragraph shall, with respect to the first such violation, receive a warning letter from the Attorney General and, if a business, the business shall be required to conduct mandatory education of the sales employees of the firm with regard to the legal sales of pseudoephedrine. For a second violation occurring

1 Section 401 of Public Law 104-237 (21 U.S.C. 802 note).

within 2 years of the first violation, the business or individual shall be subject to a civil penalty of not more than $5,000. For any subsequent violation occurring within 2 years of the previous violation, the business or individual shall be subject to a civil penalty not to exceed the amount of the previous civil penalty plus $5,000.

(i) IN GENERAL.-Not sooner than the effective date of this section and subject to the requirements of clause (ii), the Attorney General may establish by regulation a single-transaction limit of 24 grams of phenylpropanolamine base for retail distributors. Notwithstanding any other provision of law, the singletransaction threshold quantity for phenylpropanolamine-containing compounds may not be lowered beyond that established in this paragraph.

(ii) CONDITIONS.-In order to establish a singletransaction limit of 24 grams of phenylpropanolamine base, the Attorney General shall establish, following notice, comment, and an informal hearing, that since the date of enactment of this Act there are a significant number of instances where ordinary over-thecounter phenylpropanolamine products as established in paragraph (45) of section 102 of the Controlled Substances Act (21 U.S.C. 802(45)), as added by this Act, sold by retail distributors as established in paragraph (46) in section 102 of the Controlled Substances Act (21 U.S.C. 802(46)), are being used as a significant source of precursor chemicals for illegal manufacture of a controlled substance in bulk.

(B) VIOLATION.-Any individual or business that violates the thresholds established in this paragraph shall, with respect to the first such violation, receive a warning letter from the Attorney General and, if a business, the business shall be required to conduct mandatory education of the sales employees of the firm with regard to the legal sales of pseudoephedrine. For a second violation occurring within 2 years of the first violation, the business or individual shall be subject to a civil penalty of not more than $5,000. For any subsequent violation occurring within 2 years of the previous violation, the business or individual shall be subject to a civil penalty not to exceed the amount of the previous civil penalty plus $5,000.

(3) SIGNIFICANT NUMBER OF INSTANCES.

(A) IN GENERAL.-For purposes of this subsection, isolated or infrequent use, or use in insubstantial quantities, of ordinary over-the-counter pseudoephedrine or phenylpropanolamine, as defined in section 102(45) of the Controlled Substances Act, as added by section 401(b) of this Act, and sold at the retail level for the illicit manufacture of methamphetamine or amphetamine may not be used by the Attorney General as the basis for establishing the conditions under paragraph (1)(A)(ii) of this subsection, with

633 RETAIL SALES OF PSEUDOEPHEDRINE & PHENYLPROPANOLAMINE Sec. 401

respect to pseudoephedrine, and paragraph (2)(A)(ii) of this subsection, with respect to phenylpropanolamine.

(B) CONSIDERATIONS AND REPORT.-The Attorney General shall

(i) in establishing a finding under paragraph (1)(A)(ii) or (2)(A)(ii) of this subsection, consult with the Secretary of Health and Human Services in order to consider the effects on public health that would occur from the establishment of new single transaction limits as provided in such paragraph; and

(ii) upon establishing a finding, transmit a report to the Committees on the Judiciary in both, respectively, the House of Representatives and the Senate in which the Attorney General will provide the factual basis for establishing the new single transaction limits.

(4) DEFINITION OF BUSINESS.-For purposes of this subsection, the term "business" means the entity that makes the direct sale and does not include the parent company of a business not involved in a direct sale regulated by this subsection.

(5) JUDICIAL REVIEW.-Any regulation promulgated by the Attorney General under this section shall be subject to judicial review pursuant to section 507 of the Controlled Substances Act (21 U.S.C. 877).

(e) EFFECT ON THRESHOLDS.-Nothing in the amendments made by subsection (b) or the provisions of subsection (d) shall affect the authority of the Attorney General to modify thresholds (including cumulative thresholds) for retail distributors for products other than ordinary over-the-counter pseudoephedrine or phenylpropanolamine products (as defined in section 102(45) of the Controlled Substances Act, as added by this section) or for non-retail distributors, importers, or exporters.

(f) COMBINATION EPHEDRINE PRODUCTS.

(1) IN GENERAL.-For the purposes of this section, combination ephedrine products shall be treated the same pseudoephedrine products, except that

as

(A) a single transaction limit of 24 grams shall be effective as of the date of enactment of this Act and shall apply to sales of all combination ephedrine products, notwithstanding the form in which those products are packaged, made by retail distributors or distributors required to submit a report under section 310(b)(3) of the Controlled Substances Act (as added by section 402 of this Act);

(B) for regulated transactions for combination ephedrine products other than sales described in subparagraph (A), the transaction limit shall be

(i) 1 kilogram of ephedrine base, effective on the date of enactment of this Act; or

(ii) a threshold other than the threshold described in clause (i), if established by the Attorney General not earlier than 1 year after the date of enactment of this Act; and

(C) the penalties provided in subsection (d)(1)(B) of this section shall take effect on the date of enactment of