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THOMAS BRUGATO Special Counsel, Covington & Burling LLP

Background

Thomas Brugato is a Special Counsel in the Washington, DC office of Covington & Burling LLP. He has particular expertise in advising companies on environmental-related issues arising in the context of product recalls. His practice focuses on environmental matters, including complex waste- management issues under RCRA, and he has advised several companies on practical considerations relating to EPA’s new hazardous waste pharmaceutical rule.

EPA’s Hazardous Waste Pharmaceuticals Rule Has Significant Implications for Pharmaceuticals and Product Recalls

Under the Resource Conservation and Recovery Act (“RCRA”), waste deemed “hazardous waste” is subject to onerous regulatory requirements, including: a 90-day storage limitation, shipment to a RCRA-permitted facility for disposal, and tracking from generation to disposal via a manifest system. Moreover, RCRA “hazardous waste” can include a wide variety of products not typically thought of as falling within that category, such as pharmaceuticals, airbags, electronics, and aerosol cans. Against this backdrop, EPA’s recently finalized rule regulating “hazardous waste pharmaceuticals” under RCRA has major implications not only for pharmaceuticals, but also for recalls of other categories of products.

The importance of ensurance compliance should not be underestimated

The rule adopts a specialized regime governing the management of certain hazardous waste pharmaceuticals discarded by healthcare facilities or managed by so-called “reverse” distributors—i.e., entities that coordinate return of unwanted, unused, or expired pharmaceuticals, which may be eligible for manufacturer credit when returned. Last month the EPA clarified their reverse logistics policy under RCRA as described in the pharmaceutical rule “applies beyond pharmaceuticals and to the entire retail sector.”1 The new regime is generally less onerous than EPA’s previous RCRA rules, but will nevertheless pose compliance challenges because EPA has generally not enforced RCRA in the context of pharmaceuticals. EPA and states are likely to increase enforcement efforts in this area, now that the rule has entered into force in EPA-administered states, and has been adopted by a number of states with delegated authority under RCRA.

EPA’s rule is significant for product recalls, including outside of the pharmaceutical sector. Companies engaged in recalls of products subject to RCRA’s hazardous waste requirements may be able to avoid the application of RCRA by coordinating with the agency overseeing the recall as well as EPA.

1 https://rcrapublic.epa.gov/files/14915.pdf

I. Background

Pharmaceuticals that either bear certain defined characteristics (i.e., are ignitable, toxic, corrosive,
or reactive), or contain chemicals that are on lists published by EPA, have historically been subject to regulation as hazardous wastes under EPA’s general RCRA rules when disposed. EPA proposed in 2015 a new subpart of the RCRA regulations that would apply solely to hazardous waste pharmaceuticals, which it finalized in early 2019.

II. Implications of the Rule for Pharmaceuticals

  • Companies Must Determine If a Pharmaceutical Is a “Hazardous Waste Pharmaceutical.” EPA’s final rule has not significantly changed the definition of pharmaceuticals that are considered hazardous waste. The rule defines a “hazardous waste pharmaceutical” as a waste that exhibits a characteristic of hazardousness under RCRA or that is a listed waste under RCRA, which is consistent with RCRA’s long-standing definition of hazardous waste. 40 C.F.R. $266.500.
  • Companies Must Then Determine What Specific Requirements Apply to Their Pharmaceuticals, Based On EPA’s New Five-Tier Scheme. EPA’s rule creates a five-tier scheme governing hazardous waste pharmaceuticals. Prescription hazardous waste pharmaceuticals that are “potentially creditable” by manufacturers are subject to relatively modest requirements. Once those pharmaceuticals are evaluated by a reverse distributor, they are considered “evaluated hazardous waste pharmaceuticals” and must be shipped for disposal. Prescription hazardous waste pharmaceuticals that are non-creditable are more rigorously regulated, and are subject to requirements only somewhat less onerous than the traditional RCRA requirements. Finally, nonprescription pharmaceuticals are generally not considered hazardous waste. However, if there is no reasonable expectation that such pharmaceuticals will be reused or reclaimed, then they will be considered hazardous waste.

III. Implications of the Rule for Recalls

  • Companies Should Take Steps to Ensure FDA/CPSC Recalls of Pharmaceuticals Are Exempt from RCRA. Pharmaceuticals subject to FDA or CPSC recall procedures are exempt from RCRA, until and unless the FDA or CPSC approves their plan of destruction. At that point, RCRA’s requirements will immediately apply, such as RCRA’s 90-day limit on storing hazardous waste without a RCRA permit. Accordingly, in large-volume recalls industry participants should work with FDA/CPSC to have the agencies allow disposal of the recalled items on a phased, rolling basis, rather than all at once. Such coordination will ensure that recalling entities can dispose of the recalled hazardous waste pharmaceuticals without running afoul of RCRA’s requirements.
  • Companies Should Take Steps to Ensure Any Drug Take-Back Programs Are Exempt from RCRA. Hazardous waste pharmaceuticals that are collected in take-back programs in conformity with DEA requirements are generally exempt from the rule. Companies managing such take-back programs should ensure that the applicable EPA and DEA requirements are satisfied so those pharmaceuticals are not subject to RCRA.
  • Entities Should Structure Recalls to Minimize RCRA Compliance Obligations. Consistent with EPA’s policy, entities conducting recalls—including of non-pharmaceutical products—should evaluate whether their recalled products could be subject to RCRA. If so, they should work with the agency overseeing the recall to clarify formal preservation obligations, such that RCRA would not apply until recalled products are “released” from the recall and ready for disposal, and a disposal plan is in place.
  • Products That Can Be Recycled or Reclaimed Are Not Subject to RCRA. EPA continues to acknowledge that if the recalled item may be reused, recycled, or reclaimed, it is not subject to the hazardous waste rules. EPA explains that pharmaceuticals are “not solid waste” if they are “legitimately used/reused (e.g., lawfully donated for their intended purpose) or reclaimed.” 40 C.F.R. § 266.501(g)(1). Thus, if companies can structure their recalls legitimately to reuse, recycle, or reclaim their recalled products, it can potential create an avenue to manage recalled products without subjecting them to RCRA.

IV. Compliance & Likely Increase in Enforcement

The rule became effective in August 2019. Most states have delegated RCRA authority, and so may choose to add more stringent or broader requirements (but will be required at a minimum to adopt the EPA rules, which EPA views as more stringent than its current rules). Market participants should work with counsel to ensure compliance with RCRA’s sometimes arcane requirements, including state-specific requirements, as well as EPA’s 960-page response to comments document interpreting the regulatory requirements set forth in the rule. They should also conduct reviews of their reverse-distribution contracts and related policies to ensure that they are not unnecessarily causing more pharmaceuticals to fall into the category of hazardous waste. Particularly in light of RCRA’s $37,500 per day penalty for each violation and EPA’s likely upcoming enforcement efforts, the importance of ensuring compliance should not be underestimated.

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