Title of Regulation: 18VAC110-50. Regulations Governing Wholesale Distributors, Manufacturers, and Warehousers (amending 18VAC110-50-10 through 18VAC110-50-40, 18VAC110-50-60, 18VAC110-50-70, 18VAC110-50-80, 18VAC110-50-100 through 18VAC110-50-150; repealing 18VAC110-50-160 through 18VAC110-50-190).

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: June 14, 2017.

Effective Date: June 29, 2017.

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: Section 54.1-2400 of the Code of Virginia provides the Board of Pharmacy the authority to promulgate regulations to administer the regulatory system, and § 54.1-3307 of the Code of Virginia requires the board to regulate the practice of pharmacy and the manufacturing, dispensing, selling, distributing, processing, compounding, or disposal of drugs and devices; control the character and standard of all drugs, cosmetics, and devices within the Commonwealth; investigate all complaints as to the quality and strength of all drugs, cosmetics, and devices; and take such action as may be necessary to prevent the manufacturing, dispensing, selling, distributing, processing, compounding and disposal of such drugs, cosmetics and devices that do not conform to the requirements of law. Chapter 221 of the 2016 Acts of Assembly requires the board to promulgate regulations for third-party logistics providers and nonresident manufacturers.

Purpose: The Drug Quality and Security Act (DQSA) became effective November 27, 2013. Title II of DQSA, Drug Supply Chain Security Act (DSCSA), outlines steps to build an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States. The law intends to enhance the U.S. Food and Drug Administration's ability to help protect consumers from exposure to drugs that may be counterfeit, stolen, contaminated, or otherwise harmful. The DSCSA preempts states from (i) imposing pedigree (track and trace) requirements that do not comply with federal track and trace requirements for drug distribution and (ii) issuing a wholesale distributor license or nonresident wholesale distributor registration to third-party logistics providers and nonresident manufacturers. Therefore, it was necessary to amend certain state laws, including § 54.1-3307 of the Code of Virginia, and regulations to provide the board with legal ability to fulfill its duties in regulating the manufacturing, compounding, and distribution of drugs while not violating federal law.

Previously, state law authorized the board to license third-party logistics providers (entities that provide or coordinate warehousing, or other logistics services of a drug or device in interstate commerce on behalf of a manufacturer, wholesale distributor, or dispenser of a drug or device, but does not take ownership of the product or have responsibility to direct the sale or disposition of the product) as wholesale distributors and nonresident wholesale distributors. The DSCSA preempts states from issuing out-of-state manufacturers and in-state and out-of-state third-party logistics providers a wholesale distributor license. Since state law does not authorize an entity to ship controlled substances within or into the Commonwealth without holding a license with the board, it is necessary to create new licensing categories for these entities in order to ensure the continued ability of third-party logistics providers and nonresident manufacturers to provide services in Virginia and for the board to continue regulatory oversight of such entities to protect the integrity of the drug supply and the health and safety of citizens of the Commonwealth.

Rationale for Using Fast-Track Rulemaking Process: The board has adopted regulations that conform to the statutory provisions of the Code of Virginia as amended by the General Assembly. There is no fiscal impact on entities that were previously permitted as wholesale distributors since the fees are identical. Therefore, there should be no opposition to using the fast-track rulemaking process.

Substance: The amendments eliminate definitions that are no longer applicable or are set out in the Code of Virginia, provide for permits for third-party logistics providers and for registration of nonresident manufacturers with fees and schedules for renewal of such permits or registrations, include third-party logistics providers in all sections currently applicable to wholesale distributors, include nonresident manufacturers in requirements for manufacturers, and eliminate Part IV (18VAC110-50-160 et seq.) on pedigree requirements and replace those regulations with reference to the federal requirements for an electronic, interoperable system to identify, trace, and verify prescription drugs as they are distributed.

Issues: The primary advantage to the public is continuation of services currently provided by nonresident manufacturers and third-party logistics providers. There are no disadvantages to the public or the businesses that have previously held permits as wholesale distributors. There are no advantages or disadvantages to the agency.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. Pursuant to Chapter 221 of the 2016 Acts of Assembly¹ and to conform to requirements in the federal Drug Quality and Security Act (DQSA – 2013),² the Board of Pharmacy (Board) proposes to amend its regulation that governs wholesale distributers, manufacturers and warehousers of drugs. Specifically, the Board proposes to 1) remove definitions from the regulation that have been made obsolete by, or are duplicative of, definitions in Chapter 221, 2) provide for some individuals currently licensed as nonresident wholesale distributers and resident wholesale distributers to be permitted as third-party logistics providers or registered as nonresident manufacturers, 3) amend language to clarify that the newly categorized nonresident manufacturers follow the same rules as resident manufacturers, and 4) eliminate the susceptible drugs and pedigree requirements and authentications sections in this regulation and replace them with a reference to federal requirements for an electronic, interoperable system to identify trace and verify prescription drugs as they are distributed.

Result of Analysis. Benefits outweigh costs for all proposed changes.

Estimated Economic Impact. Current regulation licenses all third-party logistics providers³ as wholesale distributers or nonresident wholesale distributers. In 2013, the United States Congress passed the DQSA and it was signed into law. The DQSA preempts states from licensing out-of-state manufacturers and in-state and out-of-state third-party logistics providers as wholesale distributers and nonresident wholesale distributers. In 2016, the General Assembly passed Chapter 221 to conform state law to the DQSA. In order to implement Chapter 221 and conform this regulation to the DQSA, the Board now proposes to 1) remove definitions that are obsolete or duplicative of those in state legislation, 2) create two new categories of licensure to cover third-party logistics providers and nonresident manufacturers, 3) amend language to clarify that the newly categorized nonresident manufacturers follow the same rules as resident manufacturers, and 4) eliminate the susceptible drugs and pedigree requirements and authentications sections in this regulation and replace them with a reference to federal requirements for an electronic, interoperable system to identify trace and verify prescription drugs as they are distributed.

No entities are likely to incur additional costs on account of these proposed changes as they strictly clarify and conform regulation to state and federal law. Specifically, third-party logistics providers and nonresident manufacturers will not incur additional costs because their fees for permits and registration will be that same as the fees they paid to be licensed as wholesale distributers and nonresident wholesale distributers and their renewal cycle will not change. All affected entities will benefit from this regulatory action as it will eliminate confusion about the rules for drug wholesale distributers, manufacturers, and warehousers.

Businesses and Entities Affected. Board staff reports that there are 759 nonresident wholesale distributers and 120 resident wholesale distributers that are governed by this regulation and that some of these distributers will change to a new category of licensure on account of this proposed regulation. Affected entities will pay the same fees and follow the same rules as they do currently. Only the name of their license will change.

Localities Particularly Affected. No locality is likely to be particularly affected by these proposed regulatory changes.

Projected Impact on Employment. These proposed regulatory changes are unlikely to affect employment in the Commonwealth.

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

Real Estate Development Costs. These proposed regulatory changes are unlikely to affect real estate development costs in the Commonwealth.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. No small businesses will be adversely affected by these proposed regulatory changes.

Alternative Method that Minimizes Adverse Impact. No small businesses will be adversely affected by these proposed regulatory changes.

Adverse Impacts:

Businesses. No businesses will be adversely affected by these proposed regulatory changes.

Localities. Localities in the Commonwealth are unlikely to see any adverse impacts on account of these proposed regulatory changes.

Other Entities. No other entities are likely to be adversely affected by these proposed changes.

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¹http://leg1.state.va.us/cgi-bin/legp504.exe?161+ful+CHAP0221

²https://www.gpo.gov/fdsys/pkg/PLAW-113publ54/pdf/PLAW-113publ54.pdf

³Third party logistics providers are entities licensed by the Board as wholesale distributors or registered as nonresident wholesale distributors that contract with a manufacturer to provide or coordinate warehousing, distribution, or other services on behalf of a manufacturer for a prescription drug, but do not take title to the prescription drug and only sell, distribute, or otherwise dispose of the prescription drug at the direction of the manufacturer.

Agency's Response to Economic Impact Analysis: The Board of Pharmacy concurs with the economic impact analysis of the Department of Planning and Budget.

Summary:

Pursuant to Chapter 221 of the 2016 Acts of Assembly, the amendments (i) eliminate definitions that are no longer applicable or are set out in the Code of Virginia; (ii) provide for permits for third-party logistics providers and for registration of nonresident manufacturers with fees and schedules for renewal of such permits or registrations; (iii) include third-party logistics providers in all sections currently applicable to wholesale distributors; (iv) include nonresident manufacturers in requirements for manufacturers; and (v) repeal Part IV (18VAC110-50-160 et seq.) on pedigree requirements and replace those provisions with reference to the federal requirements for an electronic, interoperable system to identify, trace, and verify prescription drugs as they are distributed.

Part I
General Provisions

18VAC110-50-10. Definitions.

In addition to words and terms defined in §§ 54.1-3300 and 54.1-3401 of the Code of Virginia, the following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Authorized collector" means a registered manufacturer, wholesale distributor, or reverse distributor that is authorized by the U.S. Drug Enforcement Administration to receive drugs from an ultimate user, a person lawfully entitled to dispose of an ultimate user decedent's property, or a long-term care facility on behalf of an ultimate user who resides or has resided at that facility for the purpose of destruction.

"Authorized distributor of record" means a wholesale distributor with whom a manufacturer has entered into a written agreement under which such wholesale distributor is either authorized to distribute all of that manufacturer's prescription drug products, or only those products listed in the agreement, for such a period of time or number of shipments as specified in the agreement.

"Control number" means the unique identifying customer number assigned by the Virginia Department of Motor Vehicles to an individual when issuing a driver's license, learner's permit, or official identification card. This number is displayed on the driver's license or ID card in lieu of the social security number.

"DEA" means the U.S. Drug Enforcement Administration.

"Drop shipment" means the sale and distribution of a prescription drug in which a manufacturer, or a third-party logistics provider, or the manufacturer's exclusive distributor directly ships the prescription drug to a pharmacy, chain drug warehouse, or other person authorized to dispense or administer the prescription drug, and the pharmacy, chain drug warehouse or other authorized person is invoiced by a wholesale distributor that took title to the prescription drug during the shipping, but did not take physical possession of the prescription drug.

"Expiration date" means that date placed on a drug package by the manufacturer or repacker beyond which the product may not be dispensed or used.

"FDA" means the U.S. Food and Drug Administration.

"Manufacturer's exclusive distributor" means a distributor licensed by the board as a wholesale distributor or registered as a nonresident wholesale distributor who contracts with a manufacturer to provide or coordinate warehousing, distribution or other services on behalf of a manufacturer for a prescription drug and who takes title to that manufacturer's prescription drug, but who does not have general responsibility to direct the sale or disposition of the prescription drug.

"Third-party logistics provider" means an entity licensed by the board as a wholesale distributor or registered as a nonresident wholesale distributor that contracts with a manufacturer to provide or coordinate warehousing, distribution, or other services on behalf of a manufacturer for a prescription drug, but does not take title to the prescription drug and that only sells, distributes, or otherwise disposes of the prescription drug at the direction of the manufacturer.

"Ultimate user" means a person who has lawfully obtained, and who possesses, a controlled substance for his own use or for the use of a member of his household or for an animal owned by him or a member of his household.

"USP-NF" means the United States Pharmacopeia-National Formulary.

18VAC110-50-20. Fees.

A. Unless otherwise provided, fees listed in this section shall not be refundable.

B. Initial application fees.

1. Nonrestricted manufacturer permit	$270
2. Restricted manufacturer permit	$180
3. Wholesale distributor license	$270
4. Warehouser permit	$270
5. Nonresident wholesale distributor registration	$270
6. Controlled substances registration 7. Third-party logistics provider permit 8. Nonresident manufacturer registration	$90 $270 $270

C. Annual renewal fees shall be due on February 28 of each year.

1. Nonrestricted manufacturer permit	$270
2. Restricted manufacturer permit	$180
3. Wholesale distributor license	$270
4. Warehouser permit	$270
5. Nonresident wholesale distributor registration	$270
6. Controlled substances registration 7. Third-party logistics provider permit 8. Nonresident manufacturer registration	$90 $270 $270

D. Late fees. The following late fees shall be paid in addition to the current renewal fee to renew an expired license within one year of the expiration date. In addition, engaging in activities requiring a license, permit, or registration after the expiration date of such license, permit, or registration shall be grounds for disciplinary action by the board.

1. Nonrestricted manufacturer permit	$90
2. Restricted manufacturer permit	$60
3. Wholesale distributor license	$90
4. Warehouser permit	$90
5. Nonresident wholesale distributor registration	$90
6. Controlled substances registration 7. Third-party logistics provider permit 8. Nonresident manufacturer registration	$30 $90 $90

E. Reinstatement fees.

1. Any entity attempting to renew a license, permit, or registration more than one year after the expiration date shall submit an application for reinstatement with any required fees. Reinstatement is at the discretion of the board and, except for reinstatement following license revocation or suspension, may be granted by the executive director of the board upon completion of an application and payment of any required fees.

2. Engaging in activities requiring a license, permit, or registration after the expiration date of such license, permit, or registration shall be grounds for disciplinary action by the board. Facilities or entities that cease operation and wish to resume shall not be eligible for reinstatement, but shall apply for a new permit or registration.

3. Facilities or entities that failed to renew and continued to operate for more than one renewal cycle shall pay the current and all back renewal fees for the years in which they were operating plus the following reinstatement fees:

a. Nonrestricted manufacturer permit	$240
b. Restricted manufacturer permit	$210
c. Wholesale distributor license	$240
d. Warehouser permit	$240
e. Nonresident wholesale distributor registration	$240
f. Controlled substances registration g. Third-party logistics provider permit h. Nonresident manufacturer registration	$180 $240 $240

F. Application for change or inspection fees.

1. Reinspection fee	$150
2. Inspection fee for change of location, structural changes, or security system changes	$150
3. Change of ownership fee	$50
4. Change of responsible party	$50

G. The fee for a returned check shall be $35.

H. The fee for verification of license or, permit, or registration shall be $25.

18VAC110-50-30. Application; location of business; inspection required.

A. Any person or entity desiring to obtain a license as a wholesale distributor, registration as a nonresident wholesale distributor or nonresident manufacturer, or permit as a manufacturer, or warehouser, or third-party logistics provider shall file an application with the board on a form approved by the board. An application shall be filed for a new license, registration, or permit, or for acquisition of an existing wholesale distributor, manufacturer, or warehouser, nonresident wholesale distributor, nonresident manufacturer, or third-party logistics provider.

B. A licensee or permit holder proposing to change the location of an existing license or permit, or make structural or security system changes to an existing location, shall file an application for approval of the changes following an inspection conducted by an authorized agent of the board.

C. A license or, permit, or registration shall not be issued to any wholesale distributor, manufacturer or, warehouser, nonresident wholesale distributor, nonresident manufacturer, or third-party logistics provider to operate from a private dwelling or residence or to operate without meeting the applicable facility requirements for proper storage and distribution of drugs or devices. Before any license or, permit, or registration is issued, the applicant shall demonstrate compliance with all federal, state and local laws and ordinances.

D. If a wholesale distributor, manufacturer or, warehouser, or third-party logistics provider engages in receiving, possessing, storing, using, manufacturing, distributing, or otherwise disposing of any Schedule II-V Schedules II through V controlled substances, it shall also obtain a controlled substances registration from the board in accordance with § 54.1-3422 of the Code of Virginia, and shall also be duly registered with DEA and in compliance with all applicable laws and rules for the storage, distribution, shipping, handling, and transporting of controlled substances.

E. The proposed location, structural changes, or security system changes shall be inspected by an authorized agent of the board prior to issuance of a license or permit.

1. Applications that indicate a requested inspection date, or requests that are received after the application is filed, shall be honored provided a 14-day notice is allowed prior to the requested inspection date.

2. Requested inspection dates that do not allow a 14-day notice to the board may be adjusted by the board to provide 14 days for the scheduling of the inspection.

3. At the time of the inspection, the proposed prescription drug storage area shall comply with 18VAC110-50-40 and 18VAC110-50-50, and wholesale distributors shall meet the requirements of 18VAC110-50-90.

4. If an applicant substantially fails to meet the requirements for issuance of a permit or license and a reinspection is required, or if the applicant is not ready for the inspection on the established date and fails to notify the inspector or the board at least 24 hours prior to the inspection, the applicant shall pay a reinspection fee as specified in 18VAC110-50-20 prior to a reinspection being conducted.

F. Prescription drugs shall not be stocked within the proposed location or moved to a new location until approval is granted by the inspector or board staff.

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, or third-party logistics provider, or registration as a nonresident wholesale distributor or nonresident manufacturer 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, or registration, 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, or registration 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, or registration 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, third-party logistics provider, nonresident wholesale distributor, or nonresident manufacturer 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.

Part II
Wholesale Distributors and Third-Party Logistics Providers

18VAC110-50-60. Special or limited-use licenses.

The board may issue a limited-use wholesale distributor license, limited-use nonresident wholesale distributor registration, or limited-use third-party logistics provider permit to entities that do not engage in the wholesale distribution of prescription drugs or in the acts of a third-party logistics provider except medical gases and may waive certain requirements of regulation based on the limited nature of such distribution.

18VAC110-50-70. Minimum required information.

A. The application form for a new license or for, registration as a nonresident wholesale distributor, or permit as a third-party logistics provider 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, registrant, or permit holder and name and telephone number of a designated contact person;

2. All trade or business names used by the applicant or licensee, registrant, or permit holder;

3. The federal employer identification number of the applicant or licensee, registrant, or permit holder;

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

a. If an individual, the name, address, and 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, and 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, registered, or permitted 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, registrant, or permit holder 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, registration of nonresident wholesale distributors, and permitting of third-party logistics providers:

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, nonresident wholesale distributor, or third-party logistics provider, 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 or third-party logistics provider licensed, registered, or permitted 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, nonresident wholesale distributor registration, or third-party logistics provider permit 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, nonresident wholesale distributor, or third-party logistics provider;

5. The responsible party shall be present on a full-time basis at the location of the wholesale distributor, nonresident wholesale distributor, or third-party logistics provider 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, nonresident wholesale distributor, or third-party logistics provider and all applicable state and federal laws related to wholesale distribution of prescription drugs or the legal acts of a third-party logistics provider.

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. 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 third-party logistics providers or 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 or the legal acts of a third-party logistics provider;

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 third-party logistics providers or to the manufacture, distribution, or dispensing of prescription drugs;

3. Maintaining current working knowledge of requirements for wholesale distributors or third-party logistics providers 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.

18VAC110-50-100. Examination of drug shipments and accompanying documents.

A. Upon receipt, each shipping container shall be visually examined for identity to determine if it may contain contaminated, contraband, counterfeit, suspected of being counterfeit, or damaged drugs, or drugs or devices that are otherwise unfit for distribution. This examination shall be adequate to reveal container damage that would suggest possible contamination, adulteration, misbranding, counterfeiting, suspected counterfeiting, or other damage to the contents.

B. Upon receipt of drugs, a wholesale distributor, nonresident wholesale distributor, or third-party logistics provider must review records for accuracy, completeness, and the integrity of the drugs considering the total facts and circumstances surrounding the transactions and the wholesale distributors, nonresident wholesale distributor, or third-party logistics provider involved.

C. Each outgoing shipment shall be carefully inspected for identity of the drugs and to ensure that there is no delivery of drugs that have been damaged in storage or held under improper conditions.

18VAC110-50-110. Returned, damaged and counterfeit drugs; investigations.

A. Any drug or device returned to a manufacturer or, another wholesale distributor, or a third-party logistics provider shall be kept under the proper conditions and documentation showing that proper conditions were maintained shall be provided to the manufacturer or,  wholesale distributor, or third-party logistics provider to which the drugs are returned.

B. Any drug or device that, or any drug whose immediate or sealed outer or secondary container or labeling, is outdated, damaged, deteriorated, misbranded, adulterated, counterfeited, suspected of being counterfeited or adulterated, or otherwise deemed unfit for human consumption shall be quarantined and physically separated from other drugs and devices until its appropriate disposition.

C. When a drug or device is adulterated, misbranded, counterfeited or suspected of being counterfeit, or when the immediate or sealed outer or secondary container or labeling of any drug or device is adulterated, misbranded other than misbranding identified by the manufacturer through a recall or withdrawal, counterfeited, or suspected of being counterfeit, the wholesale distributor, nonresident wholesale distributor, or third-party logistics provider shall:

1. Provide notice to the board and the manufacturer or, wholesale distributor, or third-party logistics provider from which such drug or device was acquired within three business days of that determination.

2. Maintain any such drug or device, its containers and labeling, and its accompanying documentation or any evidence of criminal activity until its disposition by the appropriate state and federal government authorities.

D. The wholesale distributor, nonresident wholesale distributor, or third-party logistics provider shall fully cooperate with authorities conducting any investigation of counterfeiting or suspected counterfeiting to include the provision of any records related to receipt or distribution of the suspect drug or device.

18VAC110-50-120. Policies and procedures.

All wholesale distributors, nonresident wholesale distributors, or third-party logistics providers shall establish, maintain, and adhere to written policies and procedures for the proper receipt, security, storage, inventory, and distribution of prescription drugs. Wholesale distributors, nonresident wholesale distributors, or third-party logistics providers shall include in their policies and procedures at least the following:

1. A procedure for reporting thefts or losses of prescription drugs to the board and other appropriate authorities;

2. A procedure whereby the oldest approved stock of a prescription drug is distributed first. The procedure may permit deviation from this process provided the deviation is temporary and appropriate for the distribution;

3. A procedure for handling recalls and withdrawals of prescription drugs and devices;

4. Procedures for preparing for, protecting against, and handling emergency situations that affect the security and integrity of drugs or the operations of the wholesale distributor, nonresident wholesale distributor, or third-party logistics provider;

5. A procedure to ensure that outdated drugs are segregated from other drugs to include the disposition of such drugs;

6. A procedure to ensure initial and ongoing training of all employees;

7. A procedure for ensuring, both initially and on an ongoing basis, that persons with access to prescription drugs have not been convicted of a drug law or any law related to wholesale distribution of prescription drugs or that of a third-party logistics provider; and

8. A procedure for reporting counterfeit or suspected counterfeit prescription drugs or counterfeiting or suspected counterfeiting activities to the board and other appropriate law enforcement or regulatory agencies.

18VAC110-50-130. Recordkeeping.

A. All records and documentation required in this subsection shall be maintained and made available for inspection and photocopying upon request by an authorized agent of the board for a period of three years following the date the record was created or received by the wholesale distributor, nonresident wholesale distributor, or third-party logistics provider. If records are not maintained on premises at the address of record, they shall be made available within 48 hours of such request. A wholesale distributor, nonresident wholesale distributor, or third-party logistics provider shall establish and maintain the following:

1. Inventories Unless otherwise indicated in federal law, inventories and records of all transactions regarding the receipt and distribution, or other disposition of all prescription drugs, including the dates of receipt and distribution or other disposition or provision, and records related to the federal requirements for an electronic, interoperable system to identify, trace, and verify prescription drugs as they are distributed;

2. Records documenting monitoring of environmental conditions to ensure compliance with the storage requirements as required in 18VAC110-50-50;

3. Documentation of visual inspection of drugs and accompanying documents required in 18VAC110-50-100, including the date of such inspection and the identity of the person conducting the inspection;

4. Documentation of quarantine of any product and steps taken for the proper reporting and disposition of the product shall be maintained, including the handling and disposition of all outdated, damaged, deteriorated, misbranded, or adulterated drugs;

5. An ongoing list of persons or entities from whom it receives prescription drugs and persons or entities to whom it distributes prescription drugs or provides prescription drugs as a third-party logistics provider; and

6. Copies of the mandated report of thefts or unusual losses of Schedule II - V Schedules II through V controlled substances in compliance with the requirements of § 54.1-3404 of the Code of Virginia.

B. Records shall either (i) be kept at the inspection site or immediately retrievable by computer or other electronic means and made readily available at the time of inspection or (ii) if kept at a central location and not electronically retrievable at the inspection site, be made available for inspection within 48 hours of a request by an authorized agent of the board.

C. All facilities shall have adequate backup systems to protect against the inadvertent loss or deliberate destruction of data.

18VAC110-50-140. Due diligence.

A. Prior to the initial purchase of prescription drugs from another wholesale distributor or third-party logistics provider not residing and licensed in Virginia, a wholesale distributor or third-party logistics provider shall obtain, and update annually, the following information from the selling wholesale distributor or third-party logistics provider:

1. A copy of the license to wholesale distribute or act as a third-party logistics provider from the resident state. If the resident state does not require licensure as a third-party logistics provider, documentation confirming active registration with the U.S. Food and Drug Administration is acceptable;

2. The most recent facility inspection report, if available;

3. A list of other names under which the wholesale distributor or third-party logistics provider is doing business, or was formerly known as;

4. A list of principals, directors, officers, or any shareholder who owns 10% or more of outstanding stock in any nonpublicly held corporation;

5. A list of all disciplinary actions by state and federal agencies;

6. A description, including the address, dimensions, and other relevant information, of each facility or warehouse used for drug storage and distribution or for the legal acts of a third-party logistics provider; and

7. A listing of any manufacturers for whom the wholesale distributor or third-party logistics provider is an authorized distributor of record.

B. If the selling wholesale distributor's or third-party logistics provider's facility has not been inspected by the resident board or the board's agent within three years of the contemplated purchase, the purchasing wholesale distributor or third-party logistics provider may conduct an inspection of the wholesale distributor's or third-party logistics provider's facility prior to the first purchase of drugs or devices from another wholesale distributor or third-party logistics provider to ensure compliance with applicable laws and regulations relating to the storage and handling of drugs or devices. A third party may be engaged to conduct the site inspection on behalf of the purchasing wholesale distributor or third-party logistics provider.

C. Prior to the first purchase of drugs from another wholesale distributor or third-party logistics provider not residing in and licensed in Virginia, the purchasing wholesale distributor or third-party logistics provider shall secure a national criminal background check of all of the wholesale distributor's or third-party logistics provider's owners, corporate officers, and the person named as the responsible party with the resident board or licensing agency.

Part III
Manufacturers

18VAC110-50-150. Good manufacturing practices.

A. The Good Manufacturing Practice for Finished Pharmaceuticals regulations set forth in 21 CFR Part 211 are adopted by reference.

B. Each manufacturer or nonresident manufacturer of drugs shall comply with the requirements set forth in the federal regulations referred to in subsection A of this section.

Part IV
Pedigree Requirements

18VAC110-50-160. Susceptible drugs. (Repealed.)

A. The list of drugs susceptible to counterfeiting for which a pedigree is required shall be all prescription drugs in Schedules II through VI, except that a pedigree is not required for those prescription drugs that do not leave the normal distribution channel or those that include one or more of the following additional distributions or variations to the normal distribution channel:

1. Distribution by a manufacturer's exclusive distributor;

2. Distribution by a third-party logistics provider;

3. Drop shipments;

4. Distributions to a veterinarian for veterinary use;

5. Distribution from an authorized distributor of record to one other authorized distributor of record to an office-based healthcare practitioner authorized by law to dispense or administer such drug to a patient; and

6. Distributions for emergency medical reasons, defined as those in which (i) a state of emergency has been declared by the Governor in accordance with § 54.1-3307.3 of the Code of Virginia, or (ii) there is a documented shortage of a drug, where the failure to acquire and dispense a prescription drug could result in imminent danger to patient health, and the wholesale distributor, in lieu of a pedigree, complies with the following requirements:

a. Obtains and maintains documentation from the manufacturer attesting to a shortage of the prescription drug and its non-availability through normal distribution channels;

b. Purchases the prescription drug only through an authorized distributor of record and maintains the name of such distributor;

c. Maintains a list of pharmacies or other authorized entities to which the prescription drug was distributed; and

d. Notifies the board within 24 hours of such a distribution.

B. Not less than annually, the board shall evaluate whether the list of susceptible drugs in subsection A of this section should be amended. The board may modify the list under its authority to adopt exempt regulations, pursuant to § 2.2-4006 of the Administrative Process Act, in accordance with the following process:

1. The board shall conduct a public hearing on any proposed amendments to subsection A of this section. Thirty days prior to conducting such hearing, the board shall give written notice of the date, time, and place of the hearing to all persons requesting to be notified of the hearings and publish proposed amendments to the list in the Virginia Register of Regulations.

2. During the public hearing, interested parties shall be given reasonable opportunity to be heard and present information prior to final adoption of any amendments. Final amendments of the list shall also be published, pursuant to § 2.2-4031 of the Code of Virginia, in the Virginia Register of Regulations.

3. Final amendments to the list of susceptible drugs shall become effective upon filing with the Registrar of Regulations.

18VAC110-50-170. Requirements of a pedigree. (Repealed.)

A. For distributions of prescription drugs that require a pedigree in accordance with § 54.1-3307 of the Code of Virginia and 18VAC110-50-160, the pedigree shall list all distributions starting with the sale by a manufacturer through acquisition and sale by any wholesale distributor until final sale to a pharmacy or other person authorized to administer or dispense the prescription drug.

B. When required by law and regulation to provide a pedigree, a wholesale distributor shall provide an authenticated pedigree for drugs sold or returned to another wholesale distributor before or at the time the drug is shipped to such wholesale distributor.

C. The pedigree shall minimally include the following information on a prescription drug for which a pedigree is required:

1. The trade or generic name of the drug;

2. The dosage form and strength, the container size, number of containers, and lot number;

3. The name of the manufacturer of the finished drug product;

4. Each transaction in which the drug is shipped or received by a manufacturer or wholesale distributor showing the following:

a. The business name and address of each entity involved in the chain of the drug's physical custody;

b. Telephone number and other contact information needed to authenticate the pedigree;

c. Sales invoice number or other unique shipping document number that identify each transaction; and

d. The dates of the transactions to include shipping dates when a seller ships the product and the receiving dates when a purchaser receives the product.

5. A statement of certification that the information contained in the pedigree is true and accurate and the name and signature of the individual certifying the authenticity of the pedigree at the time of shipment of the drug.

D. The requirement for a pedigree shall be effective February 20, 2009.

18VAC110-50-180. Authentication of a pedigree. (Repealed.)

A. Each person who is engaged in the wholesale distribution of a drug, who is provided a pedigree as specified in 18VAC110-50-160 and attempts to further distribute that drug, shall affirmatively verify before any distribution of a prescription drug that each transaction listed on the pedigree has occurred.

B. Upon request of a wholesale distributor who is attempting to authenticate a pedigree for a drug as specified in 18VAC110-50-160, any manufacturer or wholesale distributor listed on the pedigree shall provide requested information in a timely manner, only for those applicable transactions outside the normal chain of distribution conducted by that manufacturer or wholesale distributor, to include the following:

1. Dates of receipt or shipment of the drug as well as the name, address, and other contact information of those entities from whom they received the drug or to whom they shipped the drug;

2. Lot number;

3. Sales invoice number or other unique shipping document numbers that identify each transaction; and

4. Name of the person who is providing the requested information.

C. The wholesale distributor shall record the above information and maintain the information in accordance with 18VAC110-20-190.

D. If a wholesale distributor that is attempting to authenticate the distribution of a drug back to a manufacturer is unable to authenticate each distribution, the wholesale distributor shall quarantine the drug and report to the board and the FDA within three business days after completing the attempted authentication.

18VAC110-50-190. Recordkeeping. (Repealed.)

A. Wholesale distributors shall establish and maintain inventories and records of all transactions relating to the receipt and distribution or other disposition of drugs as specified in 18VAC110-50-160, to include records of authentication of pedigrees, for a period of not less than three years.

B. All records shall be made available to the board or its authorized agent upon request. If records are not kept on premises at the address of record, they shall be made available within 48 hours of such request.