On August 31, 2015, the Environmental Protection Agency (EPA) issued a long-awaited proposed rule that would establish sector-specific requirements for the management of hazardous waste pharmaceuticals by a broad range of “healthcare facilities” (including hospitals, physician’s offices, long-term care facilities and retail pharmacies) and pharmaceutical reverse distributors. The proposed rule, Management Standards for Hazardous Waste Pharmaceuticals (Proposed Rule or Proposal), is set to be published in the Federal Register in the coming weeks. 

Background
 
The proper management of waste pharmaceuticals has long been a source of confusion for healthcare-related entities. The Resource Conservation and Recovery Act (RCRA), the federal statute governing the management and disposal of solid and hazardous wastes, was designed primarily to address waste from the manufacturing sector, and does not easily translate to the operations of healthcare facilities, which deal with a much larger array of ever-changing products and whose employees are generally not equipped to make hazardous waste determinations. 
 
Applicability
 
The Proposed Rule applies only to waste “pharmaceuticals” that are: (1) hazardous (i.e., those waste pharmaceuticals that meet the current definition of a hazardous waste under RCRA); and (2) generated by healthcare-related facilities. Importantly, EPA proposes to define “pharmaceutical” to include not only prescription drugs, but also over-the-counter (OTC) drugs (i.e., any product that is required to be labeled with “drug facts” by the federal Food and Drug Administration), dietary supplements, residues of pharmaceuticals remaining in containers, contaminated personal protective equipment, and clean-up material from the spills of pharmaceuticals. The Proposed Rule provides a conditional exemption from RCRA regulation for hazardous waste pharmaceuticals that are regulated as controlled substances by the Drug Enforcement Agency (DEA), provided that they are handled in accordance with all applicable DEA regulations and are combusted at an approved facility, including permitted large or small municipal waste combustors or RCRA permitted or interim status combustion units. 

 

The Proposed Rule also broadly defines the term “health-care facilities” to include hospitals, health clinics, optical and dental providers, chiropractors, long-term care facilities, ambulance services, coroners, pharmacies (including online and mail-order pharmacies), retailers of OTC medications, and veterinary clinics and hospitals. Under EPA’s previous RCRA interpretation, long-term care facilities were able to utilize the household waste exemption contained in RCRA. The Proposal would prohibit long-term care facilities from using this exemption for any of the wastes generated in their facility, even for wastes that are generated by and remain under the control of patients or residents in the long-term care facility. 

The Proposed Rule would require that healthcare facilities and pharmaceutical reverse distributors manage hazardous waste pharmaceuticals pursuant to a new subpart P under 40 CFR Part 266. EPA’s proposed regulatory language and the associated preamble address numerous issues of interest to industry, but five in particular stand out: (1) when does a pharmaceutical product become a waste (i.e., what is the “point of generation”); (2) standards applicable to healthcare facilities managing “creditable” and “non-creditable” hazardous waste pharmaceuticals; (3) standards applicable to pharmaceutical reverse distributors; (4) standards governing the management of pharmaceutical residues in containers; and (5) an industry-wide prohibition on the disposal of hazardous waste pharmaceuticals down the toilet or drain.
 
Point of Generation
 
Reverse distribution is a common process by which retailers send unsold consumer products (e.g., expired, recalled, or returned items) to a centralized processing facility for financial reconciliation and disposition.  Specifically, reverse distributors audit the products and evaluate whether a retailer is eligible to receive financial credit from the manufacturer. Based on guidance from their manufacturer and/or retail clients, reverse distributors determine the final disposition of the product, which may be destroyed, donated, liquidated, recycled, or returned to the manufacturer. 
 
The key regulatory issue with respect to the reverse distribution process is the point at which a product returned through the reverse supply chain becomes a “waste” subject to RCRA. Understanding the “point of generation” is critical because it determines which party is deemed the “generator” of a waste, and the point at which responsibility attaches for compliance with applicable waste handling requirements. In the preamble to the Proposed Rule, EPA proposes to reverse its longstanding position that pharmaceuticals sent to a reverse distributor for a credit evaluation are not waste.  Instead, under the Proposed Rule, the point of generation will henceforth be the point at which the healthcare facility decides to send the product to the reverse distributor. EPA reached this conclusion in large part because of its (mistaken) belief that most, if not all, pharmaceuticals sent to a reverse distributor are discarded. As a result of EPA’s determination, healthcare facilities would only be permitted to send potentially creditable hazardous waste pharmaceuticals to RCRA interim status or permitted treatment, storage or disposal facilities (TSDFs) (e.g., hazardous waste incinerators) or to pharmaceutical reverse distributors that comply with newly promulgated hazardous waste management standards. 
 
Management Standards Applicable to Creditable and Non-Creditable Hazardous Waste Pharmaceuticals
 
Under the Proposed Rule, all generators of hazardous waste pharmaceuticals, except for conditionally exempt small quantity generators (CESQGs) (those that generate less than 100 kg per month of hazardous waste or 1 kg per month of acutely hazardous waste), would be subject to different standards applicable to potentially creditable hazardous waste pharmaceuticals and non-creditable hazardous waste pharmaceuticals generated at healthcare facilities. A “potentially creditable hazardous waste pharmaceutical” must have the potential to receive manufacturer’s credit, and must be: (1) unused or un-administered; and (2) unexpired or less than one year past expiration. According to EPA, the eligibility of a pharmaceutical to receive credit is determined solely by the manufacturer’s return policy.  EPA understands that these manufacturer return policies change frequently, and pharmacies and other healthcare facilities may not always know whether a particular pharmaceutical is credit-eligible. However, according to EPA, certain pharmaceuticals are well known to be not creditable, including pharmaceuticals that have been removed from the original container, spilled, returned, or expired for greater than one year. 
 
While on-site at the healthcare facility, potentially creditable hazardous waste pharmaceuticals would be subject to relaxed on-site management requirements because EPA has determined that these potentially creditable hazardous waste pharmaceuticals pose lower environmental risks (mainly because they are still in their original packaging) than other hazardous wastes. Thus, under the Proposed Rule, potentially creditable hazardous waste pharmaceuticals may be accumulated at healthcare facilities without being subject to RCRA’s labeling, container or accumulation time requirements. If a facility decides to handle all of its potentially creditable waste pharmaceuticals (hazardous or not) as though they were hazardous, it also could avoid making individualized waste determinations for each product. Moreover, potentially credible hazardous waste pharmaceuticals may be sent to a pharmaceutical reverse distributor via a common carrier, without the need for a waste manifest, so long as the healthcare facility has provided advance notice to the pharmaceutical reverse distributor prior to each shipment. 

Under the Proposed Rule, non-creditable hazardous waste pharmaceuticals, which are not expected to receive manufacturer’s credit, must be managed on-site in accordance with requirements that are similar to current small quantity generator (SQG) requirements.  When shipped off-site, these non-credible wastes must be transported as hazardous wastes, with an accompanying hazardous waste manifest, and must be transported to and disposed of by a TSDF.  However, unlike most other hazardous wastes, non-creditable hazardous waste pharmaceuticals may be accumulated for up to one year.
 
Standards Applicable to Pharmaceutical Reverse Distributors
 
EPA’s Proposed Rule also sets forth new standards applicable to the accumulation of hazardous waste pharmaceuticals by pharmaceutical reverse distributors.  (Pharmaceutical reverse distributors that treat and/or dispose of hazardous waste pharmaceuticals, rather than just accumulate them, must comply with the RCRA Subtitle C regulations applicable to TSDFs.) The proposed accumulation standards for pharmaceutical reverse distributors are similar to RCRA’s existing standards for large quantity generators (LQGs), with the addition of certain inventory and tracking requirements.  Under the Proposed Rule, once a pharmaceutical reverse distributor evaluates a product for credit, it must either ship the product to another reverse distributor (if additional evaluation for credit is needed and the product has not already been shipped to two other reverse distributors) or dispose of the product as hazardous waste at a permitted TSDF.   
 
Unfortunately, nothing in the Proposed Rule specifically addresses the regulatory status of unsold OTCs and dietary supplements, which reverse distributors often donate or liquidate under existing law.  Indeed, it appears that under the Proposed Rule, these products would need to be disposed of as hazardous wastes either at the retail store (as non-creditable pharmaceutical hazardous wastes) or by the pharmaceutical reverse distributor (once a credit evaluation has been completed). 
  
Pharmaceutical Residues in Containers
 
Another important issue facing healthcare facilities involves the regulation of containers that formerly held P-listed hazardous wastes. P-listed hazardous wastes form a special class of “acute” wastes under RCRA.  The generation of even low quantities of acute wastes, over 1 kg per month, may subject facilities to RCRA’s more stringent LQG requirements. There has been confusion within the regulated sector regarding whether containers count toward a facility’s generator status.  In 2011, EPA issued guidance clarifying that they do not count, and that only the weight of the actual residue of the P-listed waste must be counted. In the Proposed Rule, EPA proposes different management requirements for different types of containers: (1) unit-dose containers and dispensing bottles and vials; (2) dispensed syringes; and (3) other containers and delivery devices. For example, fully dispensed unit-dose containers and dispensing bottles and vials are considered “RCRA empty” and would not be regulated as hazardous waste. The Proposed Rule contains a conditional exemption for dispensed syringes (including residues of hazardous waste pharmaceuticals that may remain in a fully dispensed syringe), provided that the syringe was used to administer a pharmaceutical to a patient, and the syringe is placed in a designated sharps container. Other containers and delivery devices containing residue of P-listed wastes would be regulated as hazardous waste. 
 
Ban on Sewer Disposal 
 
The Proposed Rule would prohibit both healthcare facilities (including CESQGs) and pharmaceutical reverse distributors from disposing of hazardous waste pharmaceuticals down the toilet or drain. This sweeping sewer ban is based on EPA’s Regulatory Impact Analysis, which summarized scientific research on the ecological effects of pharmaceuticals entering the environment on aquatic ecosystems and fish and animal populations. The Regulatory Impact Analysis is in the docket for the proposed rule (EPA-HQ-RCRA-2007-0932), but is not discussed in detail in the Proposal.    
 
Looking Forward
 
Comments on the Proposed Rule must be filed within 60 days of the publication of the Proposed Rule in the Federal Register. EPA has not provided an expected date for finalizing this Proposed Rule; however, it is likely that the Agency will push to finalize the rule prior to the end of the current Administration.
 
The Proposed Rule will have important financial implications for many healthcare, retail, and reverse distribution companies, as well as the pharmaceutical manufacturers that establish credit policies and even charitable organizations, which rely heavily on donations of OTCs through reverse distribution. EPA has requested comment on numerous key issues related to the Proposal, including the decision not to propose labeling, accumulation, or container management standards for on-site management of potentially creditable hazardous waste pharmaceuticals; the proposed definition of hazardous waste pharmaceuticals (particularly the inclusion of dietary supplements in the definition); and the decision to treat long-term care facilities as healthcare facilities rather than households. In addition, members of regulated industries will need to carefully consider the impact of the Proposed Rule on the current patchwork of existing state rules governing waste pharmaceuticals, as well as an additional rulemaking EPA is developing with respect to retail management of other types of hazardous waste.