Definitive Guide to State Regulation of the Pharmaceutical Supply Chain

Transcription

1 Helping the pharmaceutical industry navigate with confidence. Definitive Guide to State Regulation of the Pharmaceutical Supply Chain A comprehensive strategy guide to help your company achieve State-level compliance for transacting business in the pharmaceutical industry Sumeet Singh, President & Lead Consultant Samuel M. Smith, Esq., In-House Counsel & Regulatory Consultant

2 Table of Contents Table of Contents... 2 Regulations... 3 Requirements... 5 Survey of States... 6 Business Model... 7 State Licensing Services... 9 About Our Company Index - WDD Verification State Regulation of the Pharmaceutical Supply Chain pg 2

3 State Regulation Overview Regulations Every state has an organization that implements the laws & regulations which govern the manufacturing, distribution and dispensing of pharmaceuticals. The most common governance practices may include (1) licensing, (2) reporting and (3) registration ; however, sometimes, there are no requirements to do business in a state. The requirements for licensure vary widely. For example, states may or may not require a company to: (1) undergo background checks for owners and designated representatives, (2) obtain a surety bond, (3) register with the Secretary of State, and much more; this is further covered in "Requirements." State Regulation Challenges There are many challenges in navigating the "patchwork" of state regulations, requirements, and processing standards. Identifying the appropriate agency for your specific business model. For example: In Florida, the DBPR regulates wholesale drug distributors and manufacturers, whereas the Board of Pharmacy is responsible for the regulation of 503B facilities & dispensing. However, in California, the Board of Pharmacy regulates all of those business models. Ownership vs. Possession. Many of our clients consistently have trouble with how each state interprets this aspect of regulation, especially Virtual Manufacturers, reverse distributors, exporters and, of course, 3PLs. Some states only require a license for the company that sells (holds title / "directs the sale" / payee) the product because they have not implemented 3PL requirements; and some states require a license only for the company physically shipping the product into the state. However, many states would require a license for both companies. Communication with the Board. Getting in touch with the Board can be difficult: some states take up to 45 days just to open and process mail sent to them. Similar challenges can include lost/misplaced materials and unresponsiveness to s and phone calls. State Regulation of the Pharmaceutical Supply Chain pg 3

4 Regulations State Regulation Challenges Cont. Finding the applicable type of license. This challenge is usually more specific to companies with nuanced and/or uncommon business models. For example: a virtual repackager directs the repackaging of a product, but does not physically repackage the product. To sell into North Carolina, they would be required to have a Manufacturer license, in Texas they would apply for a Manufacturer/Distributor license and in Illinois, they would need to have a Wholesale Drug Distributor license. Administrative & Logistics. States can be very particular with what they ask for and how those materials should look. For example: a copy of an applicant's resident license cannot be substituted for an online print-out of a license verification from the Board. This seems counter-intuitive because a website verification will always provide the most upto-date information on a license and is often times the primary verification of a license (e.g. New Jersey). A second example is that states many times ask for more than what was originally asked for in the application/instructions and then present it as a deficiency. Change of Location. Although not a "new" license, many states essentially regard a Change of Location as a new license; adequate strategy planning is required to limit interruption of business! Cost of Non-Compliance: Disciplinary Actions & Consent Order Keeping in compliance with state regulations can be a massive challenge for any company. However, it is crucial to do so: if there is a disciplinary action or consent order handed down, it will cause continuing issues in the future. When a company admits wrongdoing in a state (after the charge, investigation and "judgement," they are required to notify their home state (if different) as well as most other state during the application or renewal phase; this is where the issues start. In some states, if there are any disciplinary actions on the company's record, they are "preliminarily denied." If denied, they have to retain legal counsel in the state to challenge the denial and get approved. If the denial goes through, the company would additionally have to report the denial, as well as the initial disciplinary action to each state agency. If a disciplinary action is reported to a state where a company is currently licensed and doing business, the company may be subject to a fee between $5,000 and $10,000, alongside another consent order. State Regulation of the Pharmaceutical Supply Chain pg 4

5 Requirements Fingerprint & Background Requirements Background checks have the biggest effect on processing times for a license. Usually only the Designated Representatives and the owners are required to undergo background checks; the reasoning behind requiring the background checks is to ensure individuals with a criminal history are not trusted to obtain licensure. Often times, states are contracted with a provider (e.g. IdentoGO for TN, 3M for MO) to process background checks so that information is processed quicker than sending it directly to the FBI (12 to 14 weeks). Surety Bonds Surety Bonds guarantee to the state agency that they will be able to collect fees assessed for any activities going against their regulations. At this time, there are about 10 states that require a Surety Bond. Surety Bonds can be obtained from a dedicated provider as well as from most insurance companies. VAWD Accreditation Verified-Accredited Wholesale Distributors (VAWD) is an accreditation program designed and implemented by the National Association of Boards of Pharmacy. It is required for non-resident companies that want to do business in Indiana, North Dakota and Wyoming as well as Maryland, in some cases. License Verification Many states require a certified/sealed License Verification from the home state of the applicant. Recently, some states have stopped offering hard copy license verification and instead have companies use the "public lookup" on the state agency website. CDR Licenses - CA & FL Two states require a separate license for Designated Representatives - California and Florida. The prerequisite in California is an online training class whereas Florida requires an in-person test, organized through Pearson. Additionally, each state requires an application, experience and satisfactory background check. FDA Reporting As states implement the federally mandated DSCSA, some states are also requiring proof of FDA reporting. State Regulation of the Pharmaceutical Supply Chain pg 5

6 Survey of States Timeline The timeline for processing a state license application varies from state-to-state: some states are extremely efficient and others have more arduous processes. Below are the states that are outliers of the average 3 to 4 months of processing time Above-Average Processing Times - CA, FL, ME, NC, NV, TN, SC Below-Average Processing Times - AR, CT, WV Cost Per State The cost for processing a state license application varies from state-to-state. Below are the states that are outliers of the average cost of $500 to $750. Total Cost Above $750 - FL, TX, MD, CA Total Cost Under $500 - MI, AL, PA Regular State Expiration Dates January 31st - FL, NJ May 31st - MN June 30th - CT, KS, MI, NH, OH, WV, WY, ID, GA July 1st - NE July 31st - VT September 30th - DE, KY, OK, OR, PA, RI, WA, TN, UT October 31st - CO, DC, NV, AZ, MO November 30th - MT December 31st - IA, MS, AL, AR, IL, LA, NC, SD, NM Most Difficult States? More Difficult - CA, FL, NC, TN, MO, MI, MD Less Difficult - CT, WV, AR, KS, LA, PA State Regulation of the Pharmaceutical Supply Chain pg 6

7 Business Model Manufacturers Manufacturers typically have the least difficulty in obtaining licensure because of the federal government's extensive reach and oversight of operations. However, manufacturers should stay on top of requirements. An often over-looked consideration is that some states require licensure for a manufacturer if their product is used by a patient in the state, regardless if they directly do business in that state. Virtual Manufacturers & Distributors Things can get complicated for virtual companies. They benefit from the fact that about 20 states do not require a virtual company to have a license to transact business in the state (see "Ownership vs Possession" section above). However, there are still challenges, including the fact that some states require an actual license from the resident state (an issue that is specifically prevalent for Pennsylvania-based companies) or that some require an inspection; that virtuals may not be able to obtain. When considering which state to open a virtual company, the following should be considered: (1) time to obtain a license (2) "difficulty" & requirements and (3) whether an inspection report is provided. States that have Separate 3PL Licensing Alabama California Delaware, 06/11/2018 Florida Kentucky New Mexico North Dakota Ohio Oklahoma Oregon South Carolina Utah West Virginia The DSCSA & 3PLs The DSCSA specifically provides that a third-party logistic provider (3PL) must not fall under the definition of a wholesale distributor and that licensing must be separate for state regulation. As a result, a company that performs both 3PL and distribution activities may be required to hold two separate licenses in some states. State Regulation of the Pharmaceutical Supply Chain pg 7

8 Prescription Device Wholesalers Business Model While generally less regulated on a state-by-state basis, device distributors often have a greater challenge in determining their license requirements. Much of the complexity resides in how a state interprets a "device" and how devices are regulated. For example: Minnesota does not license wholesale device distributors; however, they would require a license if the device contained a prescription drug. Although relatively straightforward, a company must also consider: what if the device itself is a prescription device? Or, what if the product is a syringe that was pre-filled with an orthopedic fluid, which is not prescription drug but is required to be administered by a physician? Specifically, the challenge with device distributors is identifying the exact product portfolio and customer base and then identifying what is required to be compliant with a state's requirement. Closed-Door and Long Term Care (LTC) Pharmacies The main challenge with "mail-order" pharmacies is when their customers request "stock" transactions: drugs not shipped "pursuant to a prescription." Over 80% of states (as well as the federal government) regard drugs not shipped "pursuant to a prescription" as wholesale drug distribution, not the practice of pharmacy or the "dispensing" of pharmaceuticals. However, the Big three wholesalers often have an issue with these pharmacies obtaining wholesale drug distributor licenses; it is therefore important for mail-order pharmacies to maintain a strong relationship with their wholesaler. 503A versus 503B Compounding Formalized into existence in 2013, 503A and 503B compounding pharmacies are starting to gain traction in the market. "Outsourcing facilities" are part compounding pharmacy, part manufacturer, which creates a lot of potential for this type of new business model. Fortunately, many states have kept up to date on their regulations and, appropriately, often recognize 503B facilities as wholesale drug distributors rather than pharmacies. State Regulation of the Pharmaceutical Supply Chain pg 8

9 State Licensing Services Assessing Requirements Our Assessment follows a proprietary "three-part" assessment. Companies that utilize this service include those with nuanced and/or uncommon business models (e.g. virtual repackagers, 503B, LTC pharmacies) and those with "standard" business models (e.g. wholesale distributors, manufacturers, etc.) Our "three-part" assessment includes: Board Contact: Over the years, Five Rivers RX has amassed direct contacts and relationships with members of the state agencies. We rely on these individuals to provide guidance on how the state agency implements their specific regulations. Legal Research: Our staff is experienced in identifying regulations and interpreting their meaning across multiple business models and product portfolios. NOTE: Five Rivers RX is not a law firm and cannot provide legal advice. External Resources: We stay in the loop across all of the state agencies. The last "part" of our assessment encompasses our use of agency FAQ's, Board notifications, paid-subscription materials, applications and more so that we can paint a robust picture of requirements. Obtaining New Licenses Our New License services centers on the "full process management" of state licensing. It is a three phase project which ensures your company is efficiently licensed in the required states. Onboarding State Consolidation Process Application with State agency follow up Maintaining License Portfolio Five Rivers RX can effectively maintain your license portfolio while staying on top of regulation changes that may affect your company. Process Renewals as Required State Specific Materials Request Complete & Process Application State Regulation of the Pharmaceutical Supply Chain pg 9

10 About Our Company About Five Rivers Since inception, Five Rivers RX has assisted over 175 companies across 14 different business models with a wide-variety of business objectives, complex challenges and expansion projects. Our company helps clients respond to industry changes and reach their compliance and commercialization objectives. We offer a wide range of strategy and consulting services for the pharmaceutical supply chain industry. Our clients range from international drug manufacturers with $10+ billion in annual revenue to independent, family-owned pharmacies. Authors Sumeet Singh is the Founder & President of Five Rivers RX. Drawing on the relationships and knowledge he cultivated at the helm of a distribution company and a pharmaceutical distribution start-up, Sumeet is able to bring a unique "boots on the ground" understanding of the industry. Samuel M. Smith, Esq. serves as In-House Counsel and Consultant for Five Rivers RX. Sam is a barred attorney in the Commonwealth of Pennsylvania and he received his J.D at the University of Kentucky. His expertise focuses on the federal, state and private regulation of pharmaceutical distribution. P & F: (800) E: hello@fiveriversrx.com A: King of Prussia, PA State Regulation of the Pharmaceutical Supply Chain pg 10

11 WDD License Verification Alabama Arizona Arkansas California Colorado Connecticut Delaware DC Florida Georgia Idaho Illinois Iowa Kansas Kentucky Louisiana State Regulation of the Pharmaceutical Supply Chain pg 11

12 WDD License License Verification Maine Maryland Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio State Regulation of the Pharmaceutical Supply Chain pg 12

13 WDD License License Verification Oklahoma Oregon Pennsylvania Rhode Island South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin chid= Wyoming FDA State Regulation of the Pharmaceutical Supply Chain pg 13