BILL ANALYSIS �
AB 2605
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ASSEMBLY THIRD READING
AB 2605 (Bonilla)
As Amended May 5, 2014
Majority vote
BUSINESS & PROFESSIONS 11-0APPROPRIATIONS 17-0
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|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 |
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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
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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,
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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
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