BILL ANALYSIS Ó AB 2605 Page 1 ASSEMBLY THIRD READING AB 2605 (Bonilla) As Amended May 5, 2014 Majority vote BUSINESS & PROFESSIONS 11-0APPROPRIATIONS 17-0 ----------------------------------------------------------------- |Ayes:|Bonilla, Bocanegra, |Ayes:|Gatto, Bigelow, | | |Campos, Dickinson, | |Bocanegra, Bradford, Ian | | |Eggman, Gordon, Holden, | |Calderon, Campos, | | |Maienschein, Mullin, | |Donnelly, Eggman, Gomez, | | |Skinner, Ting | |Holden, Jones, Linder, | | | | |Pan, Quirk, | | | | |Ridley-Thomas, Wagner, | | | | |Weber | ----------------------------------------------------------------- SUMMARY : Creates a license for third party logistics providers (3PL) and nonresident 3PL providers, subject to regulation by the Board of Pharmacy (BOP). Specifically, this bill : 1)Establishes an annual license requirement for 3PLs based in California and nonresident 3PL operating in California. 2)Requires a 3PL to have a facility manager who shall be responsible for compliance with applicable state and federal laws, and the 3PL's customer specifications. 3)Requires a 3PL to keep records of the manufacture, acquisition, or disposition of dangerous drugs, and current inventory, as specified. 4)Requires a 3PL to post a surety bond, as specified. 5)Establishes fees for a 3PL and nonresident 3PL license, as specified. 6)Makes other conforming and technical changes, as specified. FISCAL EFFECT : According to the Assembly Appropriations Committee: 1)One-time costs of $20,000 to add a new license type to the Department of Consumer Affairs' licensing and enforcement system AB 2605 Page 2 information technology system. 2)Minor revenue loss to the Controlled Substance Utilization Review and Evaluation System (CURES) Fund. Currently, wholesalers are assessed a $6 per year fee on each license or at renewal. The new 3PL licensees, who were previously licensed as wholesalers, would not be subject to this fee. 3)Oversight workload should remain at a similar level; the bill simply designates approximately 450 currently regulated entities as 3PL providers, but does not add new regulatory duties. In spite of the language changes related to fees, fees will remain at current levels, as most fees are already set at statutory maximums. COMMENTS : 1)Purpose of this bill. This bill will establish a 3PL and nonresident 3PL license that requires the licensees to adhere to specific state regulatory requirements, including recordkeeping, security, and storage standards established by BOP if they operate in California. This bill is sponsored by BOP. 2)3PLs. The recently passed federal Drug Supply Chain Security Act (Act) defines a 3PL as "an entity that provides or coordinates warehousing, or other logistics services of a product in interstate commerce on behalf of a manufacturer, wholesale distributor, or disperser of a product, but does not take ownership of the product, nor have responsibility to direct the sale or disposition of the product." Major companies, such as UPS, DHL, and others provide these services. The duties of a 3PL can vary from contract to contract, but the comment element is that a 3PL never holds title to the product it is contracted to manage. 3)California's e-Pedigree law. California previously regulated 3PLs as wholesalers under its now-preempted e-pedigree program. E-pedigree was California's statutory program to prevent counterfeit medicine from entering the legitimate supply chain. E-pedigree was created by SB 1307 (Figueroa), Chapter 857, Statutes of 2004, and began implementation the following year, AB 2605 Page 3 with full operability anticipated by 2015. California did not distinguish 3PLs from wholesalers in the original e-pedigree law and 3PLs were required to obtain wholesalers licenses beginning in 2006. E-pedigree was pre-empted by federal law in 2013. 4)Drug Quality and Security Act. The federal Drug Quality and Security Act was signed into law by President Obama on November 27, 2013. This bill was prompted by the fungal meningitis outbreak in 2012 linked to unsanitary conditions at a Massachusetts compounding pharmacy, as well as concerns regarding increases in counterfeit, falsified, substandard and dangerous prescription medications. The federal Drug Quality and Security Act contained two parts - the Compounding Quality Act and the Act. 5)Federal preemption. The Act will replace the patchwork system adopted by individual states and create a unified national drug track and trace program. In doing this, the Act explicitly preempted any state's requirements for tracing products through the distribution system that are inconsistent with, more stringent than, or in addition to any of the requirements under the Act. Thus, California's e-pedigree system is currently invalid by operation of law. However, the Act did allow for States to continue licensing programs for wholesale distributors and third party logistics providers, although the Act states explicitly that "No State shall regulate 3PLs as wholesale distributors." This bill creates a separate licensing system for 3PLs to be in conformance with the Act. While the Act does provide for a federal licensing system for 3PLs beginning in late 2015, until that time, 3PLs will be unregulated unless the FDA makes a specific finding that a 3PL does not utilize good handling and distribution practices. This bill will provide for ongoing licensing of 3PLs according to California law to maintain the integrity of the drug supply system. Analysis Prepared by : Sarah Huchel / B.,P. & C.P. / (916) 319-3301 FN: 0003601 AB 2605 Page 4