Titles of Regulations: 18VAC110-20. Regulations Governing the Practice of Pharmacy (amending 18VAC110-20-20, 18VAC110-20-121).

18VAC110-30. Regulations for Practitioners of the Healing Arts to Sell Controlled Substances (amending 18VAC110-30-15).

18VAC110-50. Regulations Governing Wholesale Distributors, Manufacturers, and Warehousers (amending 18VAC110-50-20).

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

Public Hearing Information:

June 5, 2019 - 9:05 a.m. - Department of Health Professions, Perimeter Center, 9960 Mayland Drive, Suite 201, Board Room 2, Richmond, VA 23233

Public Comment Deadline: July 26, 2019.

Agency Contact: Caroline Juran, RPh, Executive Director, Board of Pharmacy, 9960 Mayland Drive, Suite 300, Richmond, VA 23233-1463, telephone (804) 367-4456, FAX (804) 527-4472, or email caroline.juran@dhp.virginia.gov.

Basis: Regulations of the Board of Pharmacy are promulgated under the general authority of § 54.1-2400 of the Code of Virginia. The proposed regulation is mandated by § 54.1-113 of the Code of Virginia.

Purpose: Fees charged to applicants and licensees of the Board of Pharmacy have not been increased since 2002. During that time period, there have been three reductions in renewal fees, in 2005, 2006 and 2009. The number of regulated entities has substantially increased in recent years from 12,861 in 2002 to 37,608 in 2018, so the need for additional staff, six in 2002 to 12 in 2018, has increased costs to the board. Additionally, the cost of inspections has increased, as have expenditures for investigation and adjudication of disciplinary cases. Enforcement inspection and investigative hours have increased from 7,179.30 in fiscal year (FY) 2002 to 13,220.30 in FY17. The number of cases adjudicated have increased from 269 in 2002 to 651 in 2017. Additionally, the board's share of allocated expenditures has grown as costs to the department have increased. For example, in FY02, information technology costs were approximately $300,000; in FY17, they were $1.84 million.

Expenditures are now projected to exceed revenues in the 2018-2020 biennium. While the board has maintained a positive cash balance due to carry-over revenue, expenditures in FY18 of $3,745,630 are projected to exceed revenue of $3,131,895 by June 30, 2018. The imbalance will continue to grow in the next biennium and beyond. Therefore, the board will have a projected shortfall in its budget by 2021 of $648,614, which is projected to grow to $2,657,527 by June 30, 2022. The Board of Pharmacy must amend regulations as soon as possible to avoid the additional fee assessments that other boards had to adopt or being forced to curtail vital functions of inspection and investigation.

Without adequate revenue to support inspections of pharmacy facilities, licensing, and discipline functions, applicants for licensure or pharmacy permits cannot be approved in a timely manner, thus depriving the citizens of the Commonwealth with the pharmacy services needed. Additionally, if there is a substantial backlog of disciplinary cases, public health and safety may be at risk by allowing practitioners guilty of drug diversion or unprofessional conduct to continue in practice for several months while awaiting a review and adjudication of an investigative report.

Substance: The board has proposed a 30% increase in all fees with the exception of those functions that require an inspection, including an initial pharmacy permit and changes in location or remodeling. Those fees are set at an amount to offset the actual charge to the board by the enforcement division of the department.

Issues: The primary advantage to the public is avoidance of a reduction in investigations or inspections. There are no disadvantages to the public. The advantage to the agency is adequate revenue to offset expenditures so that a growing shortfall can be avoided, which would necessitate a one-time assessment for all regulated entities or an additional fee increase.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Board of Pharmacy (Board) proposes to raise fees.

Result of Analysis. The benefits likely¹ outweigh the costs for the proposed amendments.

Estimated Economic Impact.

Background:

Fees charged to applicants and licensees of the Board of Pharmacy have not increased since December 2002.² During that period, there have been three reductions in renewal fees (2005, 2006 and 2009), while the rate of price inflation has been 33 percent.³ The number of regulated entities has substantially increased in recent years (12,861 in 2002 to 37,608 in 2018); so the need for additional staff (six in 2002 to 12 in 2018) has increased costs to the Board. Additionally, the cost of inspections has increased, as have expenditures for investigation and adjudication of disciplinary cases. Enforcement inspection and investigative hours have increased from 7,179.30 in Fiscal Year (FY) 2002 to 13,220.30 in FY 2017. The number of cases adjudicated have increased from 269 in 2002 to 651 in 2017. Additionally, the Board's share of allocated expenditures has grown as costs to the Department of Health Professions (DHP) have increased. For example, in FY 2002, information technology (IT) costs were approximately $300,000; in FY 2017, IT costs were $1.84 million.⁴

Code of Virginia § 54.1-113.A (commonly called the Callahan Act)⁵ states that:

Following the close of any biennium, when the account for any regulatory board within the Department of Professional and Occupational Regulation or the Department of Health Professions maintained under § 54.1-308 or 54.1-2505 shows expenses allocated to it for the past biennium to be more than 10 percent greater or less than moneys collected on behalf of the board, it shall revise the fees levied by it for certification, licensure, registration, or permit and renewal thereof so that the fees are sufficient but not excessive to cover expenses.

In FY2017, the Board's expenditures were $3,272,687, while its revenues were $3,293,583. DHP projects that expenditures for FY2018 will be $3,745,630 and revenues will be $3,131,895. Thus, total expenditures for the biennium are projected to be $7,018,317, with revenues projected at $6,425,478. The projected expenditures are 9.2 percent higher than the projected revenues. This being less than 10 percent, the mandate to raise fees via the Callahan Act is not yet triggered. Nevertheless, DHP does anticipate that expenditures will continue to rise faster than revenues, necessitating higher fees to cover costs.

Proposal:

The Board proposes to increase 110 different fees in this regulatory action, primarily those paid by pharmacists, pharmacies, pharmacist interns, and pharmacy technicians. In addition, the Board is also proposing fee increases for practitioners of the healing arts and wholesale manufacturers, distributors, and warehousers. The minimum dollar value of the proposed fee increases is $5,⁶ while the maximum dollar value of the proposed fee increases is $230.⁷

The majority of the fees would increase by approximately thirty percent.⁸ For the fees that result from an inspection, the Board plans to increase the current fees to an amount to offset the actual costs of enforcement. There are 91 separate fees that would be subject to the roughly thirty percent fee increase.⁹ For pharmacists, these cover such areas as initial application fees, annual renewal fees, late fees, reinstatement fees, facility change and inspection fees, and the innovative program approval fee. For practitioners of the healing arts, these cover initial application fees, annual renewal fees, late fees, and reinstatement fees. For manufacturers and distributors, these cover application fees, renewal fees, late fees, and reinstatement fees.

The Board also proposes to increase the fee for facility permits where practitioners of the healing arts sell controlled substances, from $40 to $50. In addition, the Board proposes to repeal several fees related to humane society permits; these fees are no longer assessed since these facilities now pay a controlled substance registration fee. With the proposed fee increases, the DHP projects that the Board will have sufficient revenue to offset expenditures by June 30, 2021.

Analysis:

DHP points out that without adequate revenue to support inspections of pharmacy facilities, licensing and discipline functions, applicants for licensure or pharmacy permits cannot be approved in a timely manner. This may slow the growth of pharmacy services for the citizens of the Commonwealth. In addition, sufficient funding is needed to carry out the investigative and disciplinary activities of the board without creating significant delays in both activities.  If there is a substantial backlog of disciplinary cases, public health and safety may be at risk by allowing practitioners guilty of drug diversion, unprofessional conduct, or careless security to continue in practice for several months awaiting a review and adjudication of an investigative report. Thus, there are both clear benefits and clear costs introduced by the fee increases.

It is not 100 percent certain whether or not the benefits exceed the costs. Since regulation of professions is not a market good, there is not an obvious market price at which speedier license processing and disciplinary investigations are valued. Nevertheless, since the proposed fee increases bring fees to approximately the same level as 15 years ago once inflation is taken into consideration, the benefits likely outweigh the costs.

Businesses and Entities Affected. The proposed amendments affect all entities that and individuals who are regulated by the Board, including: 1,857 pharmacies, 14,714 pharmacists, 1,848 pharmacy interns, 14,552 pharmacy technicians, 140 pharmacy technician-training programs, 727 physicians selling controlled substances, 175 physician selling drugs locations, 10 pilot programs, 2 repackaging training programs, 66 restricted manufacturers, 47 warehousers, 116 wholesale distributors, 1,196 business controlled substance registrants, 9 continuing education course providers, 19 limited use pharmacy technicians, 258 medical equipment suppliers, 335 nonresident medical equipment suppliers, 26 nonresident outsourcing facilities, 732 nonresident pharmacies, 749 nonresident wholesale distributors, 29 non-restricted manufacturers, and 1 permitted physician.¹⁰

Localities Particularly Affected. The proposed amendments do not disproportionately affect particular localities.

Projected Impact on Employment. The proposed fee increases are not likely to significantly affect employment but may at the margin discourage the creation of a limited number of positions at affected firms.

Effects on the Use and Value of Private Property. The proposed fee increases moderately increase costs for affected businesses and would have a commensurate moderate effect on their value.

Real Estate Development Costs. The proposed amendments do not affect real estate development costs.

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. The proposed fee increases raise costs for small pharmacies and other small businesses.

Alternative Method that Minimizes Adverse Impact. If decision makers were to decide that not all current functions of the Board were necessary, or necessary to perform at the frequency or speed supported by the revenue that would be raised by the proposed fee increases, then smaller fee increases could potentially be set.

Adverse Impacts:

Businesses. The proposed fee increases raise costs for pharmacies, pharmacy technician-training programs, repackaging training programs, manufacturers, warehousers, wholesale distributors, continuing education course providers, medical equipment suppliers, outsourcing facilities, and physician practices that sell drugs.

Localities. The proposed fee increases would not likely significantly adversely affect localities.

Other Entities. The proposed fee increases would not likely significantly adversely affect other entities.

__________________________

¹This is not 100 percent certain. See Analysis subsection for discussion.

²This applies to fees that existed in 2002. There have been new fees introduced since then. Verification fees for the pharmacy professions were added in 2015 (http://townhall.virginia.gov/L/ViewAction.cfm
?actionid=3444), and permit fees for practitioners selling controlled substances were added in 2017 (http://townhall.virginia.gov/L/ViewAction.cfm?actionid=4451).

³This rate of inflation is calculated using the Gross Domestic Product: Implicit Price Deflator. See https://fred.stlouisfed.org/series/GDPDEF

⁴All data (other than inflation rate) provided by Department of Health Professions.

⁵See https://law.lis.virginia.gov/vacode/title54.1/chapter1/section54.1-113/

⁶Several fees are proposed to increase from $15 to $20 (the pharmacy intern registration fee, the late fee for an inactive pharmacist license, and the late fee for approval of a pharmacy technician training program), or from $10 to $15 (the late fee for approval of a repackaging training program, and the duplicate license or registration fee).

⁷Some fees would increase from $270 to $500; these include the pharmacy permit application fee and the permit for a physician who is licensed to dispense drugs. This latter fee was just introduced in 2017. See http://townhall.virginia.gov/l/ViewAction.cfm?actionid=4451.

⁸The actual percentages range from 28.57 percent to 33.33 percent for those fees that are increasing by approximately 30 percent.

⁹For a more complete list of the proposed fee increases, see http://townhall.virginia.gov/L/ViewXML.cfm?textid=12504.

¹⁰Data source: Department of Health Professions

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

Summary:

The proposed amendments increase Board of Pharmacy fees to cover expenses for essential functions of reviewing applications, licensing, inspecting, investigating complaints against licensees, and adjudicating and monitoring disciplinary cases. The board proposes a 30% increase in all fees, with the exception of those functions that require an inspection, including an initial pharmacy permit and changes in location or remodeling, which are set at the actual charge to the board by the enforcement division of the Department of Health Professions.

18VAC110-20-20. Fees.

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

B. Unless otherwise provided, any fees for taking required examinations shall be paid directly to the examination service as specified by the board.

C. Initial application fees.

1. Pharmacist license	$180 $235
2. Pharmacy intern registration	$15 $20
3. Pharmacy technician registration	$25 $35
4. Pharmacy permit	$270 $500
5. Permitted physician licensed to dispense drugs	$270 $500
6. Medical equipment supplier permit	$180 $235
7. Humane society permit	$20
8. 7. Outsourcing facility permit	$270 $350
9. 8. Nonresident pharmacy registration	$270 $350
10. 9. Nonresident outsourcing facility registration	$270 $350
11. 10. Controlled substances registrations	$90 $120
12. 11. Innovative program approval. If the board determines that a technical consultant is required in order to make a decision on approval, any consultant fee, not to exceed the actual cost, shall also be paid by the applicant in addition to the application fee.	$250 $325
13. 12. Approval of a pharmacy technician training program	$150 $200
14. 13. Approval of a continuing education program	$100 $130
15. 14. Approval of a repackaging training program	$50 $65

D. Annual renewal fees.

1. Pharmacist active license – due no later than December 31	$90 $120
2. Pharmacist inactive license – due no later than December 31	$45 $60
3. Pharmacy technician registration – due no later than December 31	$25 $35
4. Pharmacy permit – due no later than April 30	$270 $350
5. Physician permit to practice pharmacy – due no later than February 28	$270 $350
6. Medical equipment supplier permit – due no later than February 28	$180 $235
7. Humane society permit – due no later than February 28	$20
8. 7. Outsourcing facility permit – due no later than April 30	$270 $350
9. 8. Nonresident pharmacy registration – due no later than the date of initial registration	$270 $350
10. 9. Nonresident outsourcing facility registration – due no later than the date of initial registration	$270 $350
11. 10. Controlled substances registrations – due no later than February 28	$90 $120
12. 11. Innovative program continued approval based on board order not to exceed $200 $260 per approval period.
13. 12. Approval of a pharmacy technician training program	$75 $100 every two years
14. 13. Approval of a repackaging training program	$30 $40 every two years

E. 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 or within two years in the case of a pharmacy technician training program. 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. Pharmacist license	$30 $40
2. Pharmacist inactive license	$15 $20
3. Pharmacy technician registration	$10 $15
4. Pharmacy permit	$90 $120
5. Physician permit to practice pharmacy	$90 $120
6. Medical equipment supplier permit	$60 $80
7. Humane society permit	$5
8. 7. Outsourcing facility permit	$90 $120
9. 8. Nonresident pharmacy registration	$90 $120
10. 9. Nonresident outsourcing facility registration	$90 $120
11. 10. Controlled substances registrations	$30 $40
12. 11. Approval of a pharmacy technician training program	$15 $20
13. 12. Approval of a repackaging training program	$10 $15

F. Reinstatement fees. Any person or entity attempting to renew a license, permit, or registration more than one year after the expiration date, or more than two years after the expiration date in the case of a pharmacy technician training program, 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.

1. Pharmacist license	$210 $275
2. Pharmacist license after revocation or suspension	$500 $650
3. Pharmacy technician registration	$35 $45
4. Pharmacy technician registration after revocation or suspension	$125 $165
5. 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. 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. Pharmacy permit	$240 $315
b. Physician permit to practice pharmacy	$240 $315
c. Medical equipment supplier permit	$210 $275
d. Humane society permit	$30
e. d. Outsourcing facility permit	$240 $315
f. e. Nonresident pharmacy registration	$115 $150
g. f. Nonresident outsourcing facility registration	$240 $315
h. g. Controlled substances registration	$180 $235
i. h. Approval of a pharmacy technician training program	$75 $100
j. i. Approval of a repackaging training program	$50 $65

G. Application for change or inspection fees for facilities or other entities.

1. Change of pharmacist-in-charge	$50 $65
2. Change of ownership for any facility	$50 $65
3. Inspection for remodeling or change of location for any facility	$150 $300
4. Reinspection of any facility	$150 $300
5. Board-required inspection for a robotic pharmacy system	$150 $300
6. Board-required inspection of an innovative program location	$150 $300
7. Change of pharmacist responsible for an approved innovative program	$25 $35

H. Miscellaneous fees.

1. Duplicate wall certificate	$25 $50
2. Returned check	$35
3. Duplicate license or registration	$10 $15
4. Verification of licensure or registration	$25 $35

18VAC110-20-121. Innovative program approval.

A. An informal conference committee of the board may approve an innovative or pilot program in accordance with § 54.1-3307.2 of the Code of Virginia upon receipt of an application and fee specified in 18VAC110-20-20.

B. If the informal conference committee determines that an inspection is necessary to adequately consider an application, it may require that the applicant pay a fee specified in 18VAC110-20-20 to cover the cost of the inspection.

C. If the informal conference committee determines that a technical consultant is necessary in order for the board to make an informed decision on approval of a program, the applicant shall pay a consultant fee, not to exceed the actual cost of the consultation.

D. In the initial order granting approval of a program, the informal conference committee shall set the approval period with a schedule for submission of required reports and outcome data. The frequency of required reports shall not exceed four times a year.

E. The informal conference committee shall determine the appropriate fee for continued approval of the program based on the requirements for review and monitoring. Such renewal fee shall not exceed $200 $260 per approval period.

18VAC110-30-15. Fees.

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

B. Initial application fees.

1. License for practitioner of the healing arts to sell controlled substances: $180 $235.

2. Permit for facility in which practitioners of the healing arts sell controlled substances: $240 $315.

C. Annual renewal fees.

1. License for practitioner of the healing arts to sell controlled substances: $90 $120.

2. Permit for facility in which practitioners of the healing arts sell controlled substances: $240 $315.

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.

1. License for practitioner of the healing arts to sell controlled substances: $30 $40.

2. Permit for facility in which practitioners of the healing arts sell controlled substances: $40 $50.

E. Reinstatement fees. Any person or entity attempting to renew a license or permit more than one year after the expiration date shall submit an application for reinstatement with any required fees.

1. License for practitioner of the healing arts to sell controlled substances: $150 $195.

2. Permit for facility in which practitioners of the healing arts sell controlled substances: $240 $315.

3. Application fee for reinstatement of a license or permit that has been revoked or suspended indefinitely: $500 $650.

F. Facilities in which only one practitioner of the healing arts is licensed by the board to sell controlled substances shall be exempt from fees associated with obtaining and renewing a facility permit. Facilities that change from only one practitioner to more than one shall notify the board within 30 days of such change.

G. The fee for reinspection of any facility shall be $150 300.

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

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 $350
2. Restricted manufacturer permit	$180 $235
3. Wholesale distributor license	$270 $350
4. Warehouser permit	$270 $350
5. Nonresident wholesale distributor registration	$270 $350
6. Controlled substances registration	$90 $120
7. Third-party logistics provider permit	$270 $350
8. Nonresident manufacturer registration	$270 $350
9. Nonresident warehouser registration	$270 $350
10. Nonresident third-party logistics provider registration	$270 $350

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

1. Nonrestricted manufacturer permit	$270 $350
2. Restricted manufacturer permit	$180 $235
3. Wholesale distributor license	$270 $350
4. Warehouser permit	$270 $350
5. Nonresident wholesale distributor registration	$270 $350
6. Controlled substances registration	$90 $120
7. Third-party logistics provider permit	$270 $350
8. Nonresident manufacturer registration	$270 $350
9. Nonresident warehouser registration	$270 $350
10. Nonresident third-party logistics provider registration	$270 $350

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 $120
2. Restricted manufacturer permit	$60 $80
3. Wholesale distributor license	$90 $120
4. Warehouser permit	$90 $120
5. Nonresident wholesale distributor registration	$90 $120
6. Controlled substances registration	$30 $40
7. Third-party logistics provider permit	$90 $120
8. Nonresident manufacturer registration	$90 $120
9. Nonresident warehouser registration	$90 $120
10. Nonresident third-party logistics provider registration	$90 $120

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 $315
b. Restricted manufacturer permit	$210 $275
c. Wholesale distributor license	$240 $315
d. Warehouser permit	$240 $315
e. Nonresident wholesale distributor registration	$240 $315
f. Controlled substances registration	$180 $235
g. Third-party logistics provider permit	$240 $315
h. Nonresident manufacturer registration	$240 $315
i. Nonresident warehouser registration	$240 $315
j. Nonresident third-party logistics provider registration	$240 $315

F. Application for change or inspection fees.

1. Reinspection fee	$150 $300
2. Inspection fee for change of location, structural changes, or security system changes	$150 $300
3. Change of ownership fee	$50 $65
4. Change of responsible party	$50 $65

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

H. The fee for verification of license, permit, or registration shall be $25 $35.