BILL ANALYSIS Ó
AB 2605
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2605 (Bonilla)
As Amended August 22, 2014
Majority vote
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|ASSEMBLY: |74-1 |(May 27, 2014) |SENATE: |34-0 |(August 26, |
| | | | | |2014) |
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Original Committee Reference: B., P. & C.P.
SUMMARY : Creates a license for third party logistics providers
(3PL) and nonresident 3PL providers who handle and transport
dangerous drugs and devices, 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 designated representative 3PL 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, as well as
current inventory, as specified.
4)Requires a 3PL to post a $90,000 surety bond, as specified.
5)Establishes fees of $780 for a 3PL and nonresident 3PL
license.
6)Makes other conforming and technical changes.
The Senate amendments :
1)Revise the definition of a 3PL and reverse 3PL, add
definitions for a "designated representative 3PL" and
"responsible manager," and delineate the qualifications and
responsibilities for both new categories.
2)Set forth recordkeeping requirements for 3PLs.
3)State that if a manufacturer, wholesaler, 3PL, or pharmacy has
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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, 3PL, or pharmacy shall notify BOP within 72 hours
of obtaining that knowledge.
4)Specify that each place of business owned or operated by a
wholesaler, nonresident wholesaler, 3PL or nonresident 3PL may
only be issued a single license by BOP.
5)Require that a designated representative or designated
representative 3PL be present at all times during which a
wholesaler or 3PL, respectively, is open for business.
6)Permit a nonresident wholesaler and a nonresident 3PL under
common ownership to be licensed at the same place of business
provided that all of the following requirements are satisfied:
a) The wholesaler and the 3PL each separately maintain
records;
b) Dangerous drugs and dangerous devices owned by the
wholesaler are not commingled with the dangerous drugs and
dangerous devices handled by the 3PL;
c) Any individual acting as a designated representative for
the wholesaler is not concurrently acting as a designated
representative-3PL on behalf of the 3PL;
d) The wholesaler has its own designated
representative-in-charge responsible for the operations of
the wholesaler and the 3PL has its own responsible manager
responsible for the operations of the 3PL. The same
individual shall not concurrently serve as the responsible
manager and the designated representative-in-charge for a
wholesaler and a 3PL licensed at the same place of
business;
e) The 3PL does not handle the prescription drugs or
prescription devices owned by a prescriber;
f) The 3PL is not a reverse 3PL; and,
g) The wholesaler is not acting as a reverse distributor.
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7)Prohibit BOP from issuing or renewing a nonresident 3PL
license until the nonresident 3PL identifies a responsible
manager and notifies BOP in writing of the identity and
license number of the responsible manager.
8)Require a 3PL to notify BOP in writing within 30 days of the
date when a responsible manager ceases to act as the
responsible manager, and propose another designated
representative 3PL to take over as the responsible manager.
The proposed replacement responsible manager shall be subject
to approval by BOP. If disapproved, the 3PL 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 BOP.
9)Require an applicant for the issuance or renewal of a 3PL or
nonresident 3PL license, which is not government owned and
operated, to submit a surety bond of $90,000 or other
equivalent means of security acceptable to BOP to secure
payment of any administrative fines and any cost recovery.
10)State that a person who is not a designated representative
3PL who takes charge of a 3PL or coordinates the warehousing
or distribution of dangerous drugs or dangerous devices within
a 3PL, except as otherwise specified, is guilty of a
misdemeanor.
11)State that a person licensed as a 3PL who fails to place a
designated representative 3PL in charge of the 3PL's licensed
place of business, or any person who, by himself or herself,
or by any other person, permits the furnishing of dangerous
drugs or dangerous devices, except by a designated
representative 3PL, or as otherwise provided in this chapter,
is guilty of a misdemeanor.
12)Establish the fee for the application, investigation, and
issuance of a designated representative 3PL license.
13)Require 3PLs and nonresident 3PLs to pay a $6 fee to support
the Controlled Substances Utilization Review and Evaluation
System (CURES).
14)Require BOP to immediately identify any standard,
requirement, or regulation in California law governing
interstate commerce that is in conflict with any federal
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regulations adopted pursuant to the federal Food, Drug, and
Cosmetic Act and remove the conflict either by regulation or
pursuing legislation.
15)Require a 3PL that uses the services of a carrier, including
but not limited to the United States Postal Service or a
common carrier, to have in place and comply with written
policies and procedures that provide for both of the
following:
a) Verification that the 3PL, or the owner of the dangerous
drugs or dangerous devices stored at the 3PL, has imposed
obligations on the carrier that provide for the security
and integrity of any dangerous drugs or dangerous devices
transported by the carrier until the drugs or devices are
delivered to the transferee at its premises; and,
b) Confirmation, prior to shipping a dangerous drug or
dangerous device, that the intended recipient is legally
authorized to receive the dangerous drug or dangerous
device.
16)Make other technical and conforming changes.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1) One-time costs of about $100,000 to revise existing
regulations and make information technology upgrades to the
system used for licensing (Pharmacy Board Contingent Fund).
2) No significant ongoing licensing or enforcement costs
are anticipated, as third-party logistics providers are
already licensed under current state law. This bill would
revise the licensing requirement to conform to federal law
but would not substantially change the responsibilities of
the Board of Pharmacy.
COMMENTS :
1)Purpose of this bill. This bill will establish a 3PL and
nonresident 3PL license to be issued by BOP that requires 3PLs
which provide or coordinate warehousing or other logistics
services for dangerous drugs and devices to adhere to specific
state regulatory requirements, including recordkeeping,
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security, and storage standards. California previously
regulated these entities as wholesalers, but recent changes in
federal law now require that they be licensed separately.
This bill is sponsored by BOP.
2)Understanding "3PLs". A 3PL is 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.
3PLs that provide or coordinate warehousing or other logistics
services for dangerous drugs and devices are an integral part
of the drug supply chain.
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. The e-pedigree program was created by SB 1307
(Figueroa), Chapter 857, Statutes of 2004, and began
implementation the following year, 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)The Drug Quality and Security Act and federal preemption. The
federal Drug Quality and Security Act (DQSA) was prompted by a
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. DQSA
itself contained two major legislative elements within it -
the Compounding Quality Act and the Drug Supply Chain Security
Act (Act), the latter of which is the impetus behind this
bill.
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The Act will replace the patchwork system adopted by
individual states, such as California's e-pedigree system, and
create a unified national drug track and trace program. In
doing so, 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."
In response, this bill creates a separate licensing system for
3PLs designed to put California in conformance with the Act.
While the Act does provide for a federal licensing system for
3PLs beginning in late 2015, 3PLs will be unregulated until
that time unless the FDA makes a specific finding that a 3PL
does not utilize good handling and distribution practices.
This bill would instead provide for ongoing licensing of 3PLs
according to California law to maintain the integrity of the
drug supply system and ensure consumer safety.
5)Related legislation. SB 600 (Lieu) of the current legislative
session, would delete portions of California law related to
e-pedigree that are in conflict with DQSA. That bill is
currently pending on the Assembly Floor.
Analysis Prepared by : Sarah Huchel / B., P. & C.P. / (916)
319-3301
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