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2005 SESSION

059891812
SENATE BILL NO. 1326
Offered January 21, 2005
A BILL to amend the Code of Virginia by adding in Article 3 of Chapter 34 of Title 54.1 sections numbered 54.1-3435.1:01 through 54.1-3435.1:07, and to repeal §§ 54.1-3435, 54.1-3435.01, and 54.1-3435.1 of the Code of Virginia, relating to wholesale drug distributors; penalty.
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Patron-- Ruff
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Unanimous consent to introduce
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Referred to Committee on Education and Health
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Be it enacted by the General Assembly of Virginia:

1.  That the Code of Virginia is amended by adding in Article 3 of Chapter 34 of Title 54.1 sections numbered 54.1-3435.1:01 through 54.1-3435.1:07 as follows:

ARTICLE 3.
WHOLESALE DRUG DISTRIBUTORS AND MEDICAL
EQUIPMENT SUPPLIERS.

§ 54.1-3435.1:01. Definitions.

"Authentication" means to affirmatively verify before any distribution of a prescription drug occurs that each transaction listed on the Pedigree has occurred.

"Facility" means a facility of a wholesale distributor where prescription drugs are stored, handled, repackaged, or offered for sale.

"Immediate family" includes a person's spouse, children, parents, siblings, the spouses of a person's children, and the spouses of a person's siblings.

"Normal distribution channel" means a chain of custody for a medication that goes from a manufacturer to a wholesaler to a pharmacy to a patient.

"Pedigree" means a document or electronic file containing information that records each distribution of any given prescription drug, from sale by a pharmaceutical manufacturer, through acquisition and sale by any wholesale distributor or repackager, until final sale to a pharmacy or other person dispensing or administering the prescription drug.

"Prescription drug" means any drug (including any biological product, except for blood and blood components intended for transfusion or biological products that are also medical devices) required by Federal law (including Federal regulation) to be dispensed only by a prescription, including finished dosage forms and bulk drug substances subject to section 503(b) of the Federal Food, Drug and Cosmetic Act ("FFDCA").

"Repackage" includes repackaging or otherwise changing the container, wrapper, or labeling to further the distribution of a prescription drug.

"Repackager" means a person who repackages.

"Wholesale distributor" means anyone engaged in the wholesale distribution of prescription drugs, including, but not limited to, manufacturers (unless specified otherwise); repackagers; own-label distributors; private-label distributors; jobbers; brokers; warehouses, including manufacturers' and distributors' warehouses, chain drug warehouses, and wholesale drug warehouses; independent wholesale drug traders; and retail pharmacies that conduct wholesale distribution.

§ 54.1-3435.1:02. Wholesale drug distributor licensing requirement/minimum requirements for licensure.

A. Every wholesale distributor who engages in the wholesale distribution of prescription drugs must be licensed by the State licensing authority in the State in which it resides, and every non-resident wholesale distributor must be licensed in a State if it ships prescription drugs into that State, in accordance with this Act before engaging in wholesale distributions of wholesale prescription drugs.

B. The State licensing authority shall require the following minimum information from each wholesale distributor applying to get a license under subsection A and as part of any renewal of such license:

1. The name, full business address, and telephone number of the licensee.

2. All trade or business names used by the licensee.

3. Addresses, telephone numbers, and the names of contact persons for all facilities used by the licensee for the storage, handling, and distribution of prescription drugs.

4. The type of ownership or operation (i.e., partnership, corporation, or sole proprietorship).

5. The name(s) of the owner and/or operator of the licensee, including:

a. If a person, the name of the person;

b. If a partnership, the name of each partner, and the name of the partnership;

c. If a corporation, the name and title of each corporate officer and director, the corporate names, and the name of the State of incorporation; and

d. If a sole proprietorship, the full name of the sole proprietor and the name of the business entity.

6. A list of all licenses and permits issued to the applicant by any other State that authorizes the applicant to purchase or possess prescription drugs.

7. The name of the manager of the facility that is applying for the initial license, or to renew the license, the next four highest ranking employees responsible for prescription drug wholesale operations for the facility, and the name of all affiliated parties for the facility, together with the personal information statement and fingerprints required pursuant to subdivision 9 for each of such persons.

8. Designated representative -- The name of the applicant's designated representative for the facility, together with the personal information statement and fingerprints, required pursuant to subdivision 9 for such person.

9. Personal information statement -- Each person required by subdivisions 7 and 8 to provide a personal information statement and fingerprints shall provide the following information to the State:

a. The person's places of residence for the past seven years;

b. The person's date and place of birth;

c. The person's occupations, positions of employment, and offices held during the past seven years;

d. The principal business and address of any business, corporation, or other organization in which each such office of the person was held or in which each such occupation or position or employment was carried on;

e. Whether the person has been, during the past seven years, the subject of any proceeding for the revocation of any license and, if so, the nature of the proceeding and the disposition of the proceeding;

f. Whether, during the past seven years, the person has been enjoined, either temporarily or permanently, by a court of competent jurisdiction from violating any Federal or State law regulating the possession, control, or distribution of prescription drugs, together with details concerning any such event;

g. A description of any involvement by the person with any business, including any investments, other than the ownership of stock in a publicly traded company or mutual fund, during the past seven years, which manufactured, administered, prescribed, distributed, or stored pharmaceutical products and any lawsuits in which such businesses were named as a party;

h. A description of any felony criminal offense of which the person, as an adult, was found guilty, regardless of whether adjudication of guilt was withheld or whether the person pled guilty or nono contendere. If the person indicates that a criminal conviction is under appeal and submits a copy of the notice of appeal of that criminal offense, the applicant must, within 15 days after the disposition of the appeal, submit to the State a copy of the final written order of disposition; and

i. A photograph of the person taken in the previous 30 days.

C. The information required pursuant to subsection B shall be provided under oath.

D. The state shall not issue or renew a wholesale distributor license of an applicant, unless the State determines that the designated representative meets the following qualifications:

1. Is at least 21 years of age;

2. Has been employed full time for at least three years in a pharmacy or with a wholesale distributor in a capacity related to the dispensing and distribution of, and recordkeeping related to, prescription drugs;

3. Has received a score of 75 percent or more on an examination given by the State licensing authority regarding Federal and State laws governing wholesale distribution of prescription drugs. A designated representative, who has previously served in that capacity, must re-take the State examination each time an applicant lists the person as the designated representative in an application for license renewal;

4. Is employed by the applicant full time in a managerial level position;

5. Is actively involved in and aware of the actual daily operation of the wholesale distributor;

6. Is physically present at the facility of the applicant during regular business hours, except when the absence of the designated representative is authorized, including but not limited to, sick leave and vacation leave;

7. Is serving in the capacity of a designated representative for only one applicant at a time;

8. Does not have any convictions under any Federal, State, or local laws relating to wholesale or retail prescription drug distribution or distribution of controlled substances; and

9. Does not have any felony convictions under Federal, State, or local laws.

E. The State shall submit the fingerprints provided by a person with an initial or a renewal license application for a statewide criminal record check and for forwarding to the Federal Bureau of Investigation for a national criminal record check of the person.

F. Bond Requirement -- The State licensing authority shall require every wholesale distributor applying for a new license or the renewal of a license to submit a bond of at least, or other equivalent means of security acceptable to the State, such as an irrevocable letter of credit or a deposit in a trust account or financial institution, payable to a fund established by the State pursuant to subsection G. The purpose of the bond is to secure payment of any fines or penalties imposed by the State and any fees and costs incurred by the State regarding that license, which are authorized under State law and which the licensee fails to pay 30 days after the fines, penalties, or costs become final. The State may make a claim against such bond or security until one year after the licensee's license ceases to be valid.

G. The State licensing authority shall establish a fund, separate from its other accounts, in which to deposit the wholesale distributor bonds.

H. If a wholesale distributor distributes prescription drugs from more than one facility, the wholesale distributor shall obtain a license for each facility.

I. Changes in any information in subsection B of this section shall be submitted to the State licensing authority as required by such authority.

§ 54.1-3435.1:03. Minimum restrictions on transactions.

A. Five Percent Rule -- In any calendar month, a wholesale distributor shall sell, distribute, transfer, or otherwise sell at least 95 percent of its total amount of prescription drugs to a pharmacy or other person dispensing or administering the drug.

B. Purchases and Receipts from Pharmacies.

1. A wholesale distributor shall not purchase or otherwise receive a prescription drug from a pharmacy, except that a wholesale distributor may receive a prescription drug from a pharmacy if the prescription drug was originally purchased by the pharmacy from the wholesale distributor.

2. A wholesale distributor who meets the exception in subdivision 1, shall not:

a. Receive from a pharmacy an amount or quantity of a prescription drug larger than the amount or quantity that was originally sold by the wholesale distributor to the pharmacy; or

b. Pay the pharmacy an amount, either in cash or credit, more than the pharmacy originally paid the wholesale distributor for the prescription drug.

C. Sale, Distribution, or Transfer to an Unlicensed Person.

A manufacturer or wholesale distributor shall furnish prescription drugs only to a person licensed by the appropriate State licensing authorities. Before furnishing prescription drugs to a person not known to the manufacturer or wholesale distributor, the manufacturer or wholesale distributor shall affirmatively verify that the person is legally authorized to receive the prescription drugs by contacting the appropriate State licensing authorities.

D. Prescription drugs furnished by a manufacturer or wholesale distributor shall be delivered only to the premises listed on the license; provided that the manufacturer or wholesale distributor may furnish prescription drugs to an authorized person or agent of that person at the premises of the manufacturer or wholesale distributor if:

1. The identity and authorization of the recipient is properly established; and

2. This method of receipt is employed only to meet the immediate needs of a particular patient of the authorized person.

Prescription drugs may be furnished to a hospital pharmacy receiving area provided that a pharmacist or authorized receiving personnel signs, at the time of delivery, a receipt showing the type and quantity of the prescription drug so received. Any discrepancy between receipt and the type and quantity of the prescription drug actually received shall be reported to the delivering manufacturer or wholesale distributor by the next business day after the delivery to the pharmacy receiving area.

E. A manufacturer or wholesale distributor shall not accept payment for, or allow the use of, a person or entity's credit to establish an account for the purchase of prescription drugs from any person other than the owner(s) of record, the chief executive officer, or the chief financial officer listed on the license of a person or entity legally authorized to receive prescription drugs. Any account established for the purchase of prescription drugs must bear the name of the licensee.

§ 54.1-3435.1:04. Pedigree.

A. In General -- Each person who is engaged in the wholesale distribution of a prescription drug (including repackagers, but excluding the original manufacturer of the finished form of the prescription drug), shall provide a Pedigree or electronic file identifying each sale, trade, or transfer of a prescription drug when a prescription drug leaves the normal distribution channel and is sold, traded, or transferred to any other person. If a pharmacy sells a drug to any person that is not the final consumer, the pharmacy shall provide to the person acquiring the prescription drug a Pedigree identifying each sale, trade, or transfer of a prescription drug. Sale, trade, or transfer of a prescription drug between licensees with a common ownership or to meet emergency needs are not subject to this section.

B. Authentication -- Each person who is engaged in the wholesale distribution of a prescription drug (including repackagers, but excluding the original manufacturer of the finished form of the prescription drug), who is in possession of a Pedigree for a prescription drug and attempts to further distribute that prescription drug, shall affirmatively verify before any distribution of a prescription drug occurs that each transaction listed on the Pedigree has occurred.

C. Contents -- The Pedigree shall:

1. Include all necessary identifying information concerning each sale in the chain of distribution of the product from the manufacturer, through acquisition and sale by any wholesale distributor or repackager, until final sale to a pharmacy or other person dispensing or administering the drug. At minimum, the necessary chain of distribution information shall include:

a. Name, address, telephone number, and if available, the e-mail address of each owner of the prescription drug and each wholesale distributor who does not take title to the prescription drug;

b. Signature of each owner of the prescription drug and each wholesale distributor who does not take title to the prescription drug;

c. Name and address of each location from which the product was shipped, if different from the owner's;

d. Transaction dates; and

e. Certification that each recipient has authenticated the Pedigree.

2. At minimum, the Pedigree shall also include the:

a. Name of the prescription drug;

b. Dosage form and strength of the prescription drug;

c. Size of the container;

d. Number of containers;

e. Lot number of the prescription drug; and

f. Name of the manufacturer of the finished dosage form.

D. Maintenance Provisions -- Each statement shall be:

1. Maintained by the purchaser and the wholesale distributor for three years; and

2. Available for inspection or removal upon a request of an authorized officer of the law.

E. Implementation -- The State licensing authority administering this Act shall adopt rules and a form relating to the requirements of this paragraph no later than [90] days after the effective date of this Act.

§ 54-1-3435.1:05. Enforcement -- order to cease distribution of a drug.

A. Order to Cease Distribution of a Prescription Drug -- If the State finds that there is a reasonable probability that:

1. A wholesale distributor has;

a. [Knowingly] violated a provision in this Act, or

b. Falsified a Pedigree, or [knowingly] sold, distributed, transferred, manufactured, repackaged, handled, or held a counterfeit prescription drug intended for human use.

2. The prescription drug at issue in subdivision 1 could cause serious, adverse health consequences or death, and

3. Other procedures would result in unreasonable delay, the State shall issue an order requiring the appropriate person (including the manufacturers, distributors, or retailers of the drug) to immediately cease distribution of the drug.

B. An order under subsection A shall provide the person subject to the order with an opportunity for an informal hearing, to be held not later than 10 days after the date of the issuance of the order, on the actions required by the order. If, after providing an opportunity for such a hearing, the State determines that inadequate grounds exist to support the actions required by the order, the State shall vacate the order.

§ 54.1-3435.1:06. Prohibited acts.

A. it is unlawful for a person to perform or cause the performance of or aid and abet any of the following acts in this State:

1. Failure to obtain a license in accordance with this Act, or operating without a valid license when a license is required by this Act;

2. Selling, distributing, transferring, or otherwise providing prescription drugs in violation of the Five Percent Rule established in subsection A of § 54.1-3435.1:03 of this Act;

3. Purchasing or otherwise receiving a prescription drug from a pharmacy, unless the requirements in subsection B of § 54.1-3435.1:03 of this Act are met;

4. The sale, distribution, or transfer of a prescription drug to a person that is not authorized under the law of the jurisdiction in which the person receives the prescription drug to receive the prescription drug, in violation of subsection C of § 54.1-3435.1:03 of this Act;

5. Failure to deliver prescription drugs to specified premises, as required by subsection D of § 54.1-3435.1:03 of this Act;

6. Accepting payment or credit for the sale of prescription drugs in violation of subsection E of § 54.1-3435.1:03 of this Act;

7. Failure to maintain or provide Pedigrees as required by this Act;

8. Failure to obtain, pass, or authenticate a Pedigree, as required by this Act;

9. Providing the State or any of its representatives or any federal official with false or fraudulent records or making false or fraudulent statements regarding any matter within the provisions of this Act;

10. Obtaining or attempting to obtain a prescription drug by fraud, deceit, misrepresentation or engaging in misrepresentation or fraud in the distribution of a prescription drug;

11. The manufacture, repacking, sale, transfer, delivery, holding, or offering for sale any prescription drug that is adulterated, misbranded, counterfeit, suspected of being counterfeit, or has otherwise been rendered unfit for distribution;

12. The adulteration, misbranding, or counterfeiting of any prescription drug;

13. The receipt of any prescription drug that is adulterated, misbranded, stolen, obtained by fraud or deceit, counterfeit, or suspected of being counterfeit, and the delivery or proffered delivery of such drug for pay or otherwise; and

14. The alteration, mutilation, destruction, obliteration, or removal of the whole or any part of the labeling of a prescription drug or the commission of any other act with respect to a prescription drug that results in the prescription drug being misbranded.

§ 54.1-3435-1:07. Penalties.

A. Violations -- If a person engages in the wholesale distribution of prescription drugs in violation of this Act, the person shall be imprisoned for not more than 15 years, and fined not more than $50,000, or both.

B. Knowing Violations -- If a person knowingly engages in wholesale distribution of prescription drugs in violation of this Act, the person shall be imprisoned for any term of years, or fined not more than $500,000, or both.

2.  That §§ 54.1-3435, 54.1-3435.01, and 54.1-3435.1 of the Code of Virginia are repealed.

3. That the provisions of this act may result in a net increase in periods of imprisonment or commitment.  Pursuant to § 30-19.1:4, the estimated amount of the necessary appropriation cannot be determined for periods of imprisonment in state adult correctional facilities and is $0 for periods of commitment to the custody of the Department of Juvenile Justice.