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AB-2605 Pharmacy: third-party logistics providers.

An act to amend Sections 208, 4040.5, 4043, 4060, 4081, 4101, 4105, 4120, 4149, 4160, 4161, 4162, 4162.5, 4164, 4165, 4166, 4167, 4168, 4169, 4201, 4305.5, 4312, 4331, and 4400 of, to amend the heading of Article 11 (commencing with Section 4160) of Chapter 9 of Division 2 of, to add Sections 4022.7, 4044.5, 4053.1, 4107.5, and 4161.5 to, and to repeal and add Section 4045 of, the Business and Professions Code, relating to pharmacy.

AB 2605, Bonilla. Pharmacy: third-party logistics providers.

(1) Under the Pharmacy Law, a violation of which is a crime, the California State Board of Pharmacy licenses and regulates the practice of pharmacy. Existing law restricts the purchase, trade, sale, or transfer of dangerous drugs or dangerous devices, as defined, to licensed wholesalers and other authorized persons. Under the Pharmacy Law, the board licenses and regulates entities, including third-party logistics providers, as wholesalers. The Pharmacy Law defines a third-party logistics provider or a reverse third-party logistics provider as an entity licensed as a wholesaler that contracts with a dangerous drug manufacturer to provide or coordinate warehousing, distribution, or other similar services on behalf of a manufacturer, but for which there is no change of ownership in the dangerous drugs. Existing law requires a wholesaler to have a pharmacist or designated representative on its premises and to be supervised or managed by a designated representative-in-charge. Existing law requires a separate license for each place of business owned or operated by a wholesaler. Existing law also requires a wholesaler to submit a surety bond of $100,000 payable to a specified fund of the board to secure payment of any administrative fine imposed by the board. Existing law, the federal Drug Supply Chain Security Act, prohibits a third-party logistics provider, as defined, from conducting any activities in a state unless each facility of the provider is licensed by the state from which drugs are distributed by the provider in accordance with regulations to be promulgated by the Secretary of the United States Department of Health and Human Services.

This bill would revise the definition of the terms third-party logistics provider and reverse third-party logistics provider to conform to federal law, as specified, and would require a third-party logistics provider of a dangerous drug or dangerous device to be separately licensed by the board as a third-party logistics provider. The bill would require a third-party logistics provider to be supervised and managed by a responsible manager who would need to be licensed by the board as a designated representative-3PL. Under the bill, a designated representative-3PL and a responsible manager would be subject to similar requirements as those imposed on a designated representative and a designated representative-in-charge, respectively. The bill would limit a place of business to a single board-issued license, except for entities under common ownership that meet specified requirements, and would require that at least one designated representative, in the case of a wholesaler, or designated representative-3PL, in the case of a third-party logistics provider, be present during business hours for each licensed place of business. The bill would require a third-party logistics provider to submit a surety bond of $90,000 payable to a specified fund of the board to secure payment of any administrative fine imposed by the board. The bill would enact parallel requirements with respect to nonresident third-party logistics providers and would make related conforming changes and delete obsolete provisions. After specified federal regulations under the federal Drug Supply Chain Security Act are promulgated, the bill would require the board to act to identify any California laws governing interstate commerce in conflict with those regulations and act to remove the conflict.

Existing law makes a wholesaler that uses the services of a carrier liable for the security and integrity of any dangerous drug or devices through that carrier until the drugs or devices are delivered to the transferee.

This bill would extend that liability when the wholesaler uses the services of a third-party logistics provider and would require a third-party logistics provider that uses the services of a carrier to have in place and comply with specified written policies and procedures.

(2) Existing law requires that all records of manufacture and of sale, acquisition, or disposition of dangerous drugs or dangerous devices be open to inspection by authorized officers of the law during business hours and be preserved for at least 3 years.

This bill would make those requirements also applicable to records of receipt and shipment of dangerous drugs and dangerous devices. The bill would also require a manufacturer, wholesaler, third-party logistics provider, or pharmacy that has reasonable cause to believe that a dangerous drug or device that is or was in its possession, and has been sold or distributed in or through California, is counterfeit or the subject of a fraudulent transaction to notify the board within 72 hours of obtaining that knowledge.

(3) Existing law sets the fees for the issuance and renewal of licenses for wholesalers and designated representatives at specified amounts and authorizes those fees to be increased to specified higher amounts.

This bill would instead set the fees at the higher amounts.

(4) Because a violation of the requirements described in paragraphs (1) and (2) above would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The people of the State of California do enact as follows:

Section 208 of the Business and Professions Code is amended to read:

208.(a) Beginning April 1, 2014, a CURES fee of six dollars ($6) shall be assessed annually on each of the licensees specified in subdivision (b) to pay the reasonable costs associated with operating and maintaining CURES for the purpose of regulating those licensees. The fee assessed pursuant to this subdivision shall be billed and collected by the regulating agency of each licensee at the time of the licensees license renewal. If the reasonable regulatory cost of operating and maintaining CURES is less than six dollars ($6) per licensee, the Department of Consumer Affairs may, by regulation, reduce the fee established by this section to the reasonable regulatory cost.(b) (1) Licensees authorized pursuant to Section 11150 of the Health and Safety Code to prescribe, order, administer, furnish, or dispense Schedule II, Schedule III, or Schedule IV controlled substances or pharmacists licensed pursuant to Chapter 9 (commencing with Section 4000) of Division 2.(2) Wholesalers, third-party logistics providers, nonresident wholesalers, and nonresident third-party logistics providers of dangerous drugs licensed pursuant to Article 11 (commencing with Section 4160) of Chapter 9 of Division 2.(3) Nongovernmental clinics licensed pursuant to Article 13 (commencing with Section 4180) and Article 14 (commencing with Section 4190) of Chapter 9 of Division 2.(4) Nongovernmental pharmacies licensed pursuant to Article 7 (commencing with Section 4110) of Chapter 9 of Division 2.(c) The funds collected pursuant to subdivision (a) shall be deposited in the CURES Fund, which is hereby created within the State Treasury. Moneys in the CURES Fund shall, upon appropriation by the Legislature, be available to the Department of Consumer Affairs to reimburse the Department of Justice for costs to operate and maintain CURES for the purposes of regulating the licensees specified in subdivision (b).(d) The Department of Consumer Affairs shall contract with the Department of Justice on behalf of the Medical Board of California, the Dental Board of California, the California State Board of Pharmacy, the Veterinary Medical Board, the Board of Registered Nursing, the Physician Assistant Board of the Medical Board of California, the Osteopathic Medical Board of California, the Naturopathic Medicine Committee of the Osteopathic Medical Board, the State Board of Optometry, and the California Board of Podiatric Medicine to operate and maintain CURES for the purposes of regulating the licensees specified in subdivision (b).

4022.7.(a) Designated representative-3PL means an individual to whom a license has been granted pursuant to Section 4053.1.(b) Responsible manager means a designated representative-3PL selected by a third-party logistics provider and approved by the board as responsible for ensuring compliance of the licensed place of business with state and federal laws with respect to dangerous drugs and dangerous devices received by, stored in, or shipped from the licensed place of business of the third-party logistics provider.

4040.5.Reverse distributor means every person who acts as an agent for pharmacies, drug wholesalers, third-party logistics providers, manufacturers, and other entities by receiving, inventorying, warehousing, and managing the disposition of outdated or nonsaleable dangerous drugs.

4043.Wholesaler means and includes a person who acts as a wholesale merchant, broker, jobber, customs broker, reverse distributor, agent, or a nonresident wholesaler, who sells for resale, or negotiates for distribution, or takes possession of, any drug or device included in Section 4022. Unless otherwise authorized by law, a wholesaler may not store, warehouse, or authorize the storage or warehousing of drugs with any person or at any location not licensed by the board.

4044.5.Reverse third-party logistics provider means an entity that processes or manages the disposition of an outdated or nonsaleable dangerous drug or dangerous device on behalf of a manufacturer, wholesaler, or dispenser of the dangerous drug or dangerous device, but does not take ownership of the dangerous drug or dangerous device nor have the responsibility to direct its sale or disposition. Unless otherwise specified in this chapter, every provision of this chapter that applies to a third-party logistics provider shall also apply to a reverse third-party logistics provider.

4045.Third-party logistics provider means an entity that provides or coordinates warehousing or other logistics services for a dangerous drug or dangerous device in intrastate or interstate commerce on behalf of a manufacturer, wholesaler, or dispenser of the dangerous drug or dangerous device, but does not take ownership of the dangerous drug or dangerous device, nor have responsibility to direct its sale or disposition.

4053.1.(a) Notwithstanding Section 4051, the board may issue a license to a qualified individual as a designated representative-3PL to provide sufficient and qualified supervision of a third-party logistics providers place of business. The designated representative-3PL shall protect the public health and safety in the handling, storage, warehousing, distribution, and shipment of dangerous drugs and dangerous devices in the third-party logistics providers place of business.(b) An individual who is at least 18 years of age may apply for a designated representative-3PL license. In order to obtain and maintain that license, the individual shall meet all of the following requirements:(1) He or she shall be a high school graduate or possess a general education development certificate equivalent.(2) He or she shall meet one of the following requirements:(A) Have a minimum of one year of paid work experience in the past three years with a third-party logistics provider.(B) Have a minimum of one year of paid work experience in the past three years in a licensed pharmacy, or with a drug wholesaler, drug distributor, or drug manufacturer, performing duties related to the distribution or dispensing of dangerous drugs or dangerous devices.(C) Meet all of the prerequisites to take the examination required for licensure as a pharmacist by the board.(3) (A) He or she shall complete a training program approved by the board that, at a minimum, addresses each of the following subjects:(i) Knowledge and understanding of California law and federal law relating to the distribution of dangerous drugs and dangerous devices.(ii) Knowledge and understanding of California law and federal law relating to the distribution of controlled substances.(iii) Knowledge and understanding of quality control systems.(iv) Knowledge and understanding of the United States Pharmacopoeia or federal Food and Drug Administration standards relating to the safe storage, handling, and transport of dangerous drugs and dangerous devices.(B) The board may, by regulation, require the training program required under this paragraph to include additional material.(C) The board shall not issue a license as a designated representative-3PL until the applicant provides proof of completion of the training required by this paragraph to the board.(c) A third-party logistics provider shall not operate without at least one designated representative-3PL present at each of its licensed places of business as required under Section 4160.

4060.A person shall not possess any controlled substance, except that furnished to a person upon the prescription of a physician, dentist, podiatrist, optometrist, veterinarian, or naturopathic doctor pursuant to Section 3640.7, or furnished pursuant to a drug order issued by a certified nurse-midwife pursuant to Section 2746.51, a nurse practitioner pursuant to Section 2836.1, a physician assistant pursuant to Section 3502.1, a naturopathic doctor pursuant to Section 3640.5, or a pharmacist pursuant to Section 4052.1, 4052.2, or 4052.6. This section does not apply to the possession of any controlled substance by a manufacturer, wholesaler, third-party logistics provider, pharmacy, pharmacist, physician, podiatrist, dentist, optometrist, veterinarian, naturopathic doctor, certified nurse-midwife, nurse practitioner, or physician assistant, if in stock in containers correctly labeled with the name and address of the supplier or producer.This section does not authorize a certified nurse-midwife, a nurse practitioner, a physician assistant, or a naturopathic doctor, to order his or her own stock of dangerous drugs and devices.

4081.(a) All records of manufacture and of sale, acquisition, receipt, shipment, or disposition of dangerous drugs or dangerous devices shall be at all times during business hours open to inspection by authorized officers of the law, and shall be preserved for at least three years from the date of making. A current inventory shall be kept by every manufacturer, wholesaler, third-party logistics provider, pharmacy, veterinary food-animal drug retailer, physician, dentist, podiatrist, veterinarian, laboratory, clinic, hospital, institution, or establishment holding a currently valid and unrevoked certificate, license, permit, registration, or exemption under Division 2 (commencing with Section 1200) of the Health and Safety Code or under Part 4 (commencing with Section 16000) of Division 9 of the Welfare and Institutions Code who maintains a stock of dangerous drugs or dangerous devices.(b) The owner, officer, and partner of a pharmacy, wholesaler, third-party logistics provider, or veterinary food-animal drug retailer shall be jointly responsible, with the pharmacist-in-charge, responsible manager, or designated representative-in-charge, for maintaining the records and inventory described in this section.(c) The pharmacist-in-charge, responsible manager, or designated representative-in-charge shall not be criminally responsible for acts of the owner, officer, partner, or employee that violate this section and of which the pharmacist-in-charge, responsible manager, or designated representative-in-charge had no knowledge, or in which he or she did not knowingly participate.

4101.(a) A pharmacist may take charge of and act as the pharmacist-in-charge of a pharmacy upon application by the pharmacy and approval by the board. A pharmacist-in-charge who ceases to act as the pharmacist-in-charge of the pharmacy shall notify the board in writing within 30 days of the date of that change in status.(b) A designated representative or a pharmacist may take charge of, and act as, the designated representative-in-charge of a wholesaler or veterinary food-animal drug retailer upon application by the wholesaler or veterinary food-animal drug retailer and approval by the board. A designated representative-in-charge who ceases to act as the designated representative-in-charge at that entity shall notify the board in writing within 30 days of the date of that change in status.(c) A designated representative-3PL may take charge of, and act as, the responsible manager of a third-party logistics provider upon application by the third-party logistics provider and approval by the board. A responsible manager who ceases to act as the responsible manager at that entity shall notify the board in writing within 30 days of the date of that change in status.

4105.(a) All records or other documentation of the acquisition and disposition of dangerous drugs and dangerous devices by any entity licensed by the board shall be retained on the licensed premises in a readily retrievable form.(b) The licensee may remove the original records or documentation from the licensed premises on a temporary basis for license-related purposes. However, a duplicate set of those records or other documentation shall be retained on the licensed premises.(c) The records required by this section shall be retained on the licensed premises for a period of three years from the date of making.(d) (1) Any records that are maintained electronically shall be maintained so that the pharmacist-in-charge, or the pharmacist on duty if the pharmacist-in-charge is not on duty, shall, at all times during which the licensed premises are open for business, be able to produce a hardcopy and electronic copy of all records of acquisition or disposition or other drug or dispensing-related records maintained electronically.(2) In the case of a veterinary food-animal drug retailer, wholesaler, or third-party logistics provider, any records that are maintained electronically shall be maintained so that the designated representative-in-charge or the responsible manager, or the designated representative on duty or the designated representative-3PL on duty if the designated representative-in-charge or responsible manager is not on duty, shall, at all times during which the licensed place of business is open for business, be able to produce a hardcopy and electronic copy of all records of acquisition or disposition or other drug or dispensing-related records maintained electronically.(e) (1) Notwithstanding subdivisions (a), (b), and (c), the board may, upon written request, grant to a licensee a waiver of the requirements that the records described in subdivisions (a), (b), and (c) be kept on the licensed premises.(2) A waiver granted pursuant to this subdivision shall not affect the boards authority under this section or any other provision of this chapter.(f) When requested by an authorized officer of the law or by an authorized representative of the board, the owner, corporate officer, or manager of an entity licensed by the board shall provide the board with the requested records within three business days of the time the request was made. The entity may request in writing an extension of this timeframe for a period not to exceed 14 calendar days from the date the records were requested. A request for an extension of time is subject to the approval of the board. An extension shall be deemed approved if the board fails to deny the extension request within two business days of the time the extension request was made directly to the board.

4107.5.If a manufacturer, wholesaler, third-party logistics provider, or pharmacy has reasonable cause to believe that a dangerous drug or dangerous device in, or having been in, its possession is counterfeit or the subject of a fraudulent transaction, the manufacturer, wholesaler, third-party logistics provider, or pharmacy shall notify the board within 72 hours of obtaining that knowledge. This section shall apply to any dangerous drug or dangerous device that has been sold or distributed in or through this state.

4120.(a) A nonresident pharmacy shall not sell or distribute dangerous drugs or dangerous devices in this state through any person or media other than a wholesaler or third-party logistics provider who has obtained a license pursuant to this chapter or through a selling or distribution outlet that is licensed as a wholesaler or third-party logistics provider pursuant to this chapter without registering as a nonresident pharmacy.(b) Applications for a nonresident pharmacy registration shall be made on a form furnished by the board. The board may require any information as the board deems reasonably necessary to carry out the purposes of this section.(c) The Legislature, by enacting this section, does not intend a license issued to any nonresident pharmacy pursuant to this section to change or affect the tax liability imposed by Chapter 3 (commencing with Section 23501) of Part 11 of Division 2 of the Revenue and Taxation Code on any nonresident pharmacy.(d) The Legislature, by enacting this section, does not intend a license issued to any nonresident pharmacy pursuant to this section to serve as any evidence that the nonresident pharmacy is doing business within this state.

4149.(a) A nonresident distributor shall not sell or distribute hypodermic needles or syringes in this state without obtaining a license from the board pursuant to Section 4141.(b) Notwithstanding subdivision (a), a license is not required if the nonresident distributor sells or distributes solely through a person who is licensed as a wholesaler or third-party logistics provider pursuant to Section 4160.(c) The Legislature, by enacting this section, does not intend a license issued to any nonresident distributor pursuant to this article to serve as evidence that the entity is doing business within this state.

The heading of Article 11 (commencing with Section 4160) of Chapter 9 of Division 2 of the Business and Professions Code is amended to read:

Article  11.  Wholesalers, Third-Party Logistics Providers, and Manufacturers

Section 4160 of the Business and Professions Code is amended to read:

4160.(a) A person shall not act as a wholesaler or third-party logistics provider of any dangerous drug or dangerous device unless he or she has obtained a license from the board.(b) Upon approval by the board and the payment of the required fee, the board shall issue a license to the applicant.(c) (1) A separate license shall be required for each place of business owned or operated by a wholesaler or third-party logistics provider. Each place of business may only be issued a single license by the board, except as provided in paragraph (2). Each license shall be renewed annually and shall not be transferable. At all times during which a place of business is open for business, at least one designated representative, in the case of a wholesaler, or designated representative-3PL in the case of a third-party logistics provider, shall be present.(2) A wholesaler and a third-party logistics provider under common ownership may be licensed at the same place of business provided that all of the following requirements are satisfied:(A) The wholesaler and the third-party logistics provider each separately maintain the records required under Section 4081.(B) Dangerous drugs and dangerous devices owned by the wholesaler are not commingled with the dangerous drugs and dangerous devices handled by the third-party logistics provider.(C) Any individual acting as a designated representative for the wholesaler is not concurrently acting as a designated representative-3PL on behalf of the third-party logistics provider. Nothing in this subparagraph shall be construed to prohibit an individual from concurrently holding a license to act as a designated representative and to act as a designated representative-3PL.(D) The wholesaler has its own designated representative-in-charge responsible for the operations of the wholesaler and the third-party logistics provider has its own responsible manager responsible for the operations of the third-party logistics provider. The same individual shall not concurrently serve as the responsible manager and the designated representative-in-charge for a wholesaler and a third-party logistics provider licensed at the same place of business.(E) The third-party logistics provider does not handle the prescription drugs or prescription devices owned by a prescriber.(F) The third-party logistics provider is not a reverse third-party logistics provider.(G) The wholesaler is not acting as a reverse distributor.(d) Every wholesaler shall be supervised or managed by a designated representative-in-charge. The designated representative-in-charge shall be responsible for the wholesalers compliance with state and federal laws governing wholesalers. As part of its initial application for a license, and for each renewal, each wholesaler shall, on a form designed by the board, provide identifying information and the California license number for a designated representative or pharmacist proposed to serve as the designated representative-in-charge. The proposed designated representative-in-charge shall be subject to approval by the board. The board shall not issue or renew a wholesaler license without identification of an approved designated representative-in-charge for the wholesaler. The designated representative-in-charge shall maintain an active license as a designated representative with the board at all times during which he or she is designated as the designated representative-in-charge.(e) Each place of business of a third-party logistics provider shall be supervised and managed by a responsible manager. The responsible manager shall be responsible for the compliance of the place of business with state and federal laws governing third-party logistics providers and with the third-party logistics providers customer specifications, except where the customers specifications conflict with state or federal laws. As part of its initial application for a license, and for each renewal, each third-party logistics provider shall, on a form designated by the board, provide identifying information and the California license number for a designated representative-3PL proposed to serve as the responsible manager. The proposed responsible manager shall be subject to approval by the board. The board shall not issue or renew a third-party logistics provider license without identification of an approved responsible manager for the third-party logistics provider. The responsible manager shall maintain an active license as a designated representative-3PL with the board at all times during which he or she is designated as the responsible manager.(f) A wholesaler shall notify the board in writing, on a form designed by the board, within 30 days of the date when a designated representative-in-charge ceases to act as the designated representative-in-charge, and shall on the same form propose another designated representative or pharmacist to take over as the designated representative-in-charge. The proposed replacement designated representative-in-charge shall be subject to approval by the board. If disapproved, the wholesaler shall propose another replacement within 15 days of the date of disapproval, and shall continue to name proposed replacements until a designated representative-in-charge is approved by the board.(g) A third-party logistics provider shall notify the board in writing, on a form designed by the board, within 30 days of the date when a responsible manager ceases to act as the responsible manager, and shall on the same form propose another designated representative-3PL to take over as the responsible manager. The proposed replacement responsible manager shall be subject to approval by the board. If disapproved, the third-party logistics provider shall propose another replacement within 15 days of the date of disapproval, and shall continue to name proposed replacements until a responsible manager is approved by the board.(h) A drug manufacturer premises licensed by the Food and Drug Administration or licensed pursuant to Section 111615 of the Health and Safety Code that only distributes dangerous drugs and dangerous devices of its own manufacture is exempt from this section and Section 4161.(i) The board may issue a temporary license, upon conditions and for periods of time as the board determines to be in the public interest. A temporary license fee shall be required in an amount established by the board as specified in subdivision (f) of Section 4400. When needed to protect public safety, a temporary license may be issued for a period not to exceed 180 days, subject to terms and conditions that the board deems necessary. If the board determines that a temporary license was issued by mistake or denies the application for a permanent license, the temporary license shall terminate upon either personal service of the notice of termination upon the licenseholder or service by certified mail, return receipt requested, at the licenseholders address of record with the board, whi