New Labeling Regulations Pose Compliance Burdens

What's in a label? Lots of potential compliance snafus.

Most consumers think of labels as minor details—small stickers that have pricing or ingredient listings—but for some industries, labeling introduces a host of costly compliance challenges.

The Food and Drug Administration places a broad definition on “labeling,” for example, and pharmaceutical and food companies must comply with several regulations that govern them.  Labels, according to the FDA, include both affixed information for consumers, as well as documentation that each drug company must provide to doctors, hospitals, and pharmacies. Improperly prepared, these listings can lead to a violation of the False Claims Act, or any number of other patient protection laws.

Label Maker

Label requirements are nearly universal for any company that sells consumer or industrial goods. The Federal Trade Commission has a Website titled “Threading Your Way Through Labeling Requirements Under the Textile and Wool Acts,” covering such details as country of origin and fiber content.

The Consumer Product Safety Commission has a variety of label demands for children's products, including the location and date of production of the product, and detailed information on the manufacturing process. The Occupational Safety and Health Administration has enacted a variety of industrial-grade labeling requirements, particularly for the use of chemicals.

The supermarket industry is besieged by new labeling regulations, says Erik Lieberman, regulatory counsel for the Food Marketing Institute. Among them is “country of origin” labeling that requires the origin of many food products to be detailed with affixed labels or accompanying signage. It applies to “basically all” fruits, vegetables, meats, and seafood.

“It really is a headache,” Lieberman says. “Every year the U. S. Department of Agriculture sends hundreds of inspectors out and they inspect a huge percentage of all supermarkets.”

He says the compliance rate for the supermarket industry is approximately 97 percent. “Yet every year the agency has decided that it is essential to send out people to conduct thousands of inspections,” he says. As many as 8,000 inspections a year can take place among a sampling of the nation's roughly 30,000 supermarkets.

“This is a regulation that doesn't benefit the public health or safety,” Lieberman says. “It is not related to either of those, and yet the agency has placed a priority on ensuring that these labels are on everything.

The USDA also recently altered its labeling requirement. As of May 23, it requires all meat products to detail each production step and where an animal was born, raised, and slaughtered. Enforcement, after a phase-in period, begins in November.

“We are gong to have to go back and change all our labels, Lieberman says, citing a recent World Trade Organization ruling that the previous label requirement presented an illegal trade barrier. “They said it puts foreign products at a disadvantage and makes it more expensive for a retailer to carry products from multiple origins than from just one location,” he explained.

The recordkeeping that goes with the labeling is also expensive and “requires an unbelievable amount of time for compliance,” he says, explaining that a typical store has 50,000 items and corporate records and invoices on any of them can be demanded at any time.

As for the meat packing side and the processing plants, the new rule requires them to segregate production lines. In response, the industry has initiated a legal challenge to the new rule.

“Relying on electronic labeling as a complete substitute for paper labeling could adversely impact public health by limiting the availability of drug labeling for some physicians, pharmacists, and patients.”

Government Accountability Office

Another label-related brouhaha has emerged over menu listing demands contained in the Affordable Healthcare Act. All restaurants with 20 or more locations will be required to put calorie information on menus and menu boards.

The law includes restaurants and “similar retail food establishments, but stopped short at defining what those were. It was the Food and Drug Administration that decided supermarkets selling prepared foods were covered as well.

The label requirement is coupled with recordkeeping demands to keep track of the nutrition content and recipe of covered products. Each product can require as many as seven different reports. “It's a paperwork nightmare,” Lieberman says. “It affects, in a typical store, about 1,500 items, but at the corporate level we've heard that as many as 8,000 to 15,000 items that will be covered.”

By the government's own estimate, the rule will cost businesses approximately $1 billion during the first year and require 15 million paperwork hours. Lieberman says that estimate is far too conservative and the actual cost and manpower needs will be far greater.

Electronic Drug Labels

The regulations associated with labeling are at the heart of a fight within the pharmaceutical industry over the potential move to electronic labeling. Earlier this month, the Government Accountability Office issued a report on a drug industry's push to eliminate this specialized paper labeling and move to an all-electronic and online format, finding “no consensus among stakeholders on the advantages and disadvantages.”

Proponents of electronic labels say such a change would allow drug companies to provide physicians, pharmacists, and patients with the most current drug information in a user-friendlier format. Drug labeling could be made interactive to include links to definitions of key terms or to additional information, enhancing patients' knowledge about the drugs they are using.

“We encourage the FDA to implement electronic labeling regulations, so that revised labeling can be distributed without any unnecessary delays associated with the printing and distribution of paper labels,” says Tracy Cooley, spokeswoman for the Biotechnology Industry Organization.

PROS AND CONS

The following is from a report issued by the Government Accountability Office on the advantages and disadvantages of electronic drug labeling.

Stakeholders said an advantage of such a change would be that it could provide physicians, pharmacists, and patients with the most current drug information in a more user-friendly format, which would positively impact public health.

For example, drug labeling could be made interactive to include hyperlinks to definitions of key terms or to additional information, enhancing patients' knowledge about the drugs they are using. However, stakeholders noted disadvantages that could offset any advantages gained from such a change. Relying on electronic labeling as a complete substitute for paper labeling could adversely impact public health by limiting the availability of drug labeling for some physicians, pharmacists, and patients by requiring them to access drug labeling through a medium with which they might be uncomfortable, that they might find inconvenient, or that might be unavailable.

In addition, for electronic drug labeling to be successful, stakeholders said it is important to have a single data source that is reliable and unbiased.

Relying on electronic drug labeling as a complete substitute for paper drug labeling would require amending or reviewing relevant federal regulations and shift some responsibilities from drug manufacturers to pharmacies.

Stakeholders said that if patients want to continue receiving drug labeling in paper form and pharmacies are expected to print drug labeling for distribution, it would shift the costs of printing to the pharmacies.

Source: GAO.

Her organization recommends a transition to paperless labeling to patients, providers, and pharmacists with immediate access to the most current safety information.

According to the GAO report, however, the disadvantages could offset any advantages. “Relying on electronic labeling as a complete substitute for paper labeling could adversely impact public health by limiting the availability of drug labeling for some physicians, pharmacists, and patients by requiring them to access drug labeling through a medium with which they might be uncomfortable, that they might find inconvenient, or that might be unavailable,” it wrote.

Substituting electronic drug labeling for paper labeling would also require amending or reviewing relevant federal regulations and shifting some responsibilities from drug manufacturers to pharmacies,” the GAO said. According to FDA officials, changing to an exclusively electronic version would require the agency to review regulations for approved drug labeling.

Drug manufacturers also currently provide pharmacies with a supply of paper labeling for patients. “However, stakeholders said that if patients want to continue receiving drug labeling in paper form and pharmacies are expected to print drug labeling for distribution, it would shift the costs of printing to the pharmacies,” the GAO wrote. It's no minor detail; in 2011, retail pharmacies filled approximately 3.8 billion prescriptions for drugs.

Like the GAO study, Kevin Nicholson, vice president of public policy and regulatory affairs for the National Association of Chain Drug Stores, sees this as an issue that presents both benefits and risks. It could make it easier for pharmacies to access information “if it is done correctly.” That would mean having a “readily available source,” he says, and a “coordinated effort among the manufacturers so that information is provided in one site, and we don't have to search all over the Web for the information.”

Another demand from users of the labels is that the information is free, not proprietary, and is available to the public as well as the industry.  Websites that currently provide electronic labeling have limitations. “For example, non-governmental Websites are not standardized, and one Website can include information on a particular drug not included on another Website,” the GAO wrote.