Title of Regulation: 18VAC110-50. Regulations Governing Wholesale Distributors, Manufacturers, and Warehousers (amending 18VAC110-50-40, 18VAC110-50-70, 18VAC110-50-80).

Statutory Authority: §§ 54.1-2400 and 54.1-3307 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: July 17, 2013.

Effective Date: August 2, 2013.

Agency Contact: Caroline Juran, RPh, Executive Director, Board of Pharmacy, 9960 Mayland Drive, Suite 300, Richmond, VA 23233-1463, telephone (804) 367-4416, FAX (804) 527-4472, or email caroline.juran@dhp.virginia.gov.

Basis: The regulatory action is the result of a periodic review conducted pursuant to the Governor's regulatory reform project. 18VAC110-50, Regulations Governing Wholesale Distributors, Manufacturers, and Warehousers, is promulgated under the general authority of § 54.1-2400 of the Code of Virginia, which establishes the general powers and duties of health regulatory boards, including the responsibility to promulgate regulations in accordance with the Administrative Process Act.

The specific statutory authority for the Board of Pharmacy to regulate the practice of pharmacy, including the dispensing of controlled substances, is found in § 54.1-3307 of the Code of Virginia.

Purpose: The purpose of the amended regulation is elimination of certain information currently required for an application for licensure as a wholesale distributor. Information about the responsible parties is necessary to ensure the integrity of a wholesale distributor business; the board is able to eliminate certain burdensome requirements without jeopardizing the enforceability of regulations or compromising the health and safety of persons who are the ultimate recipients of drugs being distributed for dispensing.

Rationale for Using Fast-Track Process: The board has opted to use the fast-track process for two reasons: the action is consistent with the Governor's project to reform regulations that are unnecessarily burdensome, and the board does not anticipate any objection to the amendments to the regulation.

Substance: The substantive changes are (i) modification of the required information on an application for licensure as a wholesale distributor and (ii) elimination of the requirement for a sworn statement regarding criminal convictions on the application.

Issues: The primary advantage of the regulatory action is less burdensome and costly regulation for an application for licensure as a wholesale distributor. There are no disadvantages to the public. There are no advantages or disadvantages to the Commonwealth.

Small Business Impact Report of Findings: This regulatory action serves as the report of findings of the regulatory review pursuant to § 2.2-4007.1 of the Code of Virginia.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. As a result of a periodic review, the Board of Pharmacy (Board) proposes to amend its regulations for wholesalers, manufacturers and warehousers. Specifically, the Board proposes to add clarifying language to the regulations, amend the requirements for information on a application to be licensed or registered and allow licensees to file an attestation disclosing any criminal history rather than requiring a sworn statement or affirmation.

Result of Analysis. Benefits likely outweigh costs for implementing these proposed changes.

Estimated Economic Impact. Currently, 18VAC110-50-40 A requires the holder of a license to restrict access to all areas in which prescription drugs are stored or kept for sale but does not specify which holders of what licenses are being referenced. Although this requirement is in the Virginia Administrative Code chapter that governs wholesale distributors, manufacturers and warehousers, and so the implication is that the requirement would apply to these licensees, the Board proposes to add these entities explicitly into the regulatory text so that it is clear who is required to restrict access to stored prescription drugs. No affected entity will incur any additional costs on account of this proposed change. To the extent that this change may forestall any misunderstanding of what is required of licensees, this proposed change will benefit all interested parties.

Current regulations require all partners in a covered partnership business to provide name, address, and social security number or control number on the application for licensure or registration and also require the name, address, social security number or control number and title of each corporate officer for businesses that are incorporated and applying for licensure or registration. Board staff reports that the Board does not believe it is reasonable to require social security or control numbers for all partners or all officers or directors of a corporation unless the individuals are directly involved in the operation of the distributorship. Consequently, the Board now proposes to amend the requirements for information so that only individuals who are specifically responsible for the operation of a facility will be required to provide identifying information to the Board. No entity is likely to be harmed by this regulatory change because the Board will still have information for the individual that they will hold responsible should there be an issue that the Board needs to address. Potential licensees or registrants will benefit from this change as it will make the process of filling out an application less time consuming and intrusive.

Current regulations require that the person who is named as the responsible party on the application for licensure provide a statement sworn or affirmed before a notary public that discloses any criminal convictions and any pending criminal charges. The named party also had to undergo a criminal background check. Since a notary public can only swear that the person signing the statement is who he says he is but cannot swear that the statement being signed is truthful, the Board proposes to change this requirement so that the named responsible party will just have to attest that they are being truthful. They will also still have to undergo a criminal background check so the information available to the Board before a license or registration is issued should not be adversely affected. Named responsible parties will likely benefit from this change as they will no longer have to take the time to go to a notary public and will also not have to incur the costs of any fee that the notary public might charge.

Businesses and Entities Affected. The Department of Health Professions (DHP) reports that there are 768 non-resident wholesaler distributors and 116 Virginia wholesale distributors that are licensed to do business in the Commonwealth. All of these entities will be affected by these proposed regulations.

Localities Particularly Affected. No locality will be particularly affected by the proposed regulations.

Projected Impact on Employment. This proposed regulatory action is unlikely to have any effect on employment in the Commonwealth.

Effects on the Use and Value of Private Property. These proposed regulatory changes are unlikely to have any impact on the use or value of private property in the Commonwealth.

Small Businesses: Costs and Other Effects. No small business is likely to incur any costs on account of this regulatory action.

Small Businesses: Alternative Method that Minimizes Adverse Impact. No small business is likely to incur any costs on account of this regulatory action.

Real Estate Development Costs. This regulatory action will likely have no effect on real estate development costs in the Commonwealth.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 14 (10). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB's best estimate of these economic impacts.

Agency's Response to Economic Impact Analysis: The Board of Pharmacy concurs with the economic impact analysis of the Department of Planning and Budget for amendments to 18VAC110-50 relating to regulatory reform changes.

Summary:

In response to the Governor's Regulatory Reform Initiative, the board's action will make the information required in the application process more reasonable and less restrictive. Specifically, the amendments (i) modify the required information on an application for licensure as a wholesale distributor and (ii) eliminate the requirement that the statement on criminal convictions be notarized.

18VAC110-50-40. Safeguards against diversion of drugs.

A. The holder of the license as a wholesale distributor or permit as a manufacturer or warehouser shall restrict all areas in which prescription drugs are stored or kept for sale to only those persons specifically designated as necessary for the manufacture, receipt, storage, distribution, or quality control of the controlled substance inventory, and shall provide reasonable security measures to include appropriate locking devices on all access doors to these areas and adequate lighting both inside and outside the facility to deter unauthorized entry and diversion.

B. The holder of the license or permit, except for those distributors of only medical gases other than nitrous oxide, shall install a device for the detection of breaking subject to the following conditions:

1. The device shall be a sound, microwave, photoelectric, ultrasonic, or any other generally accepted and suitable device.

2. The installation shall be hardwired and both the installation and device shall be based on accepted burglar alarm industry standards.

3. The device shall be maintained in operating order and shall have an auxiliary source of power.

4. The device shall fully protect all areas where prescription drugs are stored and shall be capable of detecting breaking by any means when activated.

5. Access to the alarm system shall be restricted to the person named on the application as the responsible party or to persons specifically designated in writing in a policy and procedure manual.

6. The system shall be activated whenever the drug storage areas are closed for business.

C. Distribution or delivery of prescription drugs shall be accomplished in a manner to prevent diversion or possession of drugs by unauthorized persons.

1. The holder of the license or permit shall only deliver prescription drugs to a person authorized to possess such drugs at a location where the person is authorized to possess such drugs, and only at a time when someone authorized to possess such drugs is in attendance.

2. The holder of the license or permit shall affirmatively verify that the person to whom prescription drugs are delivered is authorized by law to receive such drugs.

3. Prescription drugs may be transferred to an authorized agent of a person who may lawfully possess prescription drugs, provided the transfer occurs on the premises of the wholesale distributor, manufacturer, or warehouser, and provided the identity and authorization of the agent is verified, and such transfer is only used to meet the immediate needs of a patient or patients.

18VAC110-50-70. Minimum required information.

A. The application form for a new license or for registration as a nonresident wholesale distributor or any change of ownership shall include at least the following information:

1. The name, full business address, and telephone number of the applicant or licensee and name and telephone number of a designated contact person;

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

3. The federal employer identification number of the applicant or licensee;

4. The type of ownership and name(s) of the owner of the entity, including:

a. If an individual, the name, address, social security number or control number;

b. If a partnership, the name, address, and social security number or control number of each partner who is specifically responsible for the operations of the facility, and the name of the partnership and federal employer identification number;

c. If a corporation:

(1) The name and address of the corporation, federal employer identification number, state of incorporation, the name and address of the resident agent of the corporation;

(2) The name, address, social security number or control number, and title of each corporate officer and director who is specifically responsible for the operations of the facility;

(3) For nonpublicly held corporations, the name and address of each shareholder that owns 10% or more of the outstanding stock of the corporation;

(4) The name, federal employer identification number, and state of incorporation of the parent company.

d. If a sole proprietorship, the full name, address, and social security number or control number of the sole proprietor and the name and federal employer identification number of the business entity;

e. If a limited liability company, the name and address of each member, the name and address of each manager, the name of the limited liability company and federal employer identification number, the name and address of the resident agent of the limited liability company, and the name of the state in which the limited liability company was organized;

5. Name, business address and telephone number, and social security number or control number, and documentation of required qualifications as stated in 18VAC110-50-80 of the person who will serve as the responsible party;

6. A list of all states in which the entity is licensed to purchase, possess and distribute prescription drugs, and into which it ships prescription drugs;

7. A list of all disciplinary actions imposed against the entity by state or federal regulatory bodies, including any such actions against the responsible party, principals, owners, directors, or officers over the last seven years;

8. A full description, for nonresident wholesale distributors, including the address, square footage, security and alarm system description, temperature and humidity control, and other relevant information of the facility or warehouse space used for prescription drug storage and distribution; and

9. An attestation providing a complete disclosure of any past criminal convictions and violations of the state and federal laws regarding drugs or devices or an affirmation and attestation that the applicant has not been involved in, or convicted of, any criminal or prohibited acts. Such attestation shall include the responsible party, principals, owners, directors, or officers.

B. An applicant or licensee shall notify the board of any changes to the information required in this section within 30 days of such change.

18VAC110-50-80. Minimum qualifications, eligibility, and responsible party.

A. The board shall use the following factors in determining the eligibility for licensure of wholesale distributors:

1. The existence of grounds to deny an application as set forth in § 54.1-3435.1 of the Code of Virginia;

2. The applicant's past experience in the manufacture or distribution of drugs or devices;

3. Compliance with the recordkeeping requirements;

4. Prior disciplinary action by a regulatory authority, prior criminal convictions, or ongoing investigations related to the manufacturing, distribution, prescribing, or dispensing of drugs by the responsible party or immediate family members of the responsible party, and owners, directors, or officers; and

5. The responsible party's credentials as set forth in subsection B of this section.

B. Requirements for the person named as the responsible party.

1. The responsible party shall be the primary contact person for the board as designated by the wholesale distributor, who shall be responsible for managing the wholesale distribution operations at that location;

2. The responsible party shall have a minimum of two years of verifiable experience in a pharmacy or wholesale distributor licensed in Virginia or another state where the person's responsibilities included, but were not limited to, managing or supervising the recordkeeping, storage, and shipment for drugs or devices;

3. A person may only serve as the responsible party for one wholesale distributor license at any one time;

4. The responsible party shall be employed full time in a managerial position and actively engaged in daily operations of the wholesale distributor;

5. The responsible party shall be present on a full-time basis at the location of the wholesale distributor during normal business hours, except for time periods when absent due to illness, family illness or death, vacation, or other authorized absence; and

6. The responsible party shall be aware of, and knowledgeable about, all policies and procedures pertaining to the operations of the wholesale distributor and all applicable state and federal laws related to wholesale distribution of prescription drugs.

C. The person named as the responsible party on the application shall submit the following with the application:

1. A passport size and quality photograph taken within 30 days of submission of the application;

2. A resume listing employment, occupations, or offices held for the past seven years including names, addresses, and telephone numbers of the places listed;

3. A sworn statement or affirmation An attestation disclosing whether the person has a criminal conviction or is the subject of any pending criminal charges within or outside the Commonwealth;

4. A criminal history record check through the Central Criminal Records Exchange; and

5. A description of any involvement by the person with any business, including any investments, other than the ownership of stock in publicly traded company or mutual fund, during the past seven years, which manufactured, administered, prescribed, distributed, or stored drugs and devices and any lawsuits, regulatory actions, or criminal convictions related to drug laws or laws concerning wholesale distribution of prescription drugs in which such businesses were named as a party.

D. Responsibilities of the responsible party.

1. Ensuring that any employee engaged in operations is adequately trained in the requirements for the lawful and appropriate wholesale distribution of prescription drugs;

2. Requiring any employee who has access to prescription drugs to attest that he has not been convicted of any federal or state drug law or any law relating to the manufacture, distribution, or dispensing of prescription drugs;

3. Maintaining current working knowledge of requirements for wholesale distributors and assuring continued training for employees;

4. Maintaining proper security, storage and shipping conditions for all prescription drugs;

5. Maintaining all required records.

E. Each nonresident wholesale distributor shall designate a registered agent in Virginia for service of any notice or other legal document. Any nonresident wholesale distributor that does not so designate a registered agent shall be deemed to have designated the Secretary of the Commonwealth to be its true and lawful agent, upon who may be served all legal process in any action or proceeding against such nonresident wholesale distributor. A copy of any such service of legal documents shall be mailed to the nonresident wholesale distributor by the board by certified mail at the address of record.