HB 1044 revise certain provisions regarding wholesale drug distributor...
ENTITLED, An Act to revise certain provisions regarding wholesale drug distributors, to provide
for licensure and regulation of outsourcing facilities for certain drugs, and to establish a fee for
licensure of outsourcing facilities.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1. That § 36-11A-1 be amended to read:
36-11A-1. Terms used in this chapter mean:
(1)
(2) "Board," the Board of Pharmacy;
(3) "Chain pharmacy warehouse," a physical location for prescription drugs that acts as a
central warehouse and performs intracompany sales or transfers of such drugs to a group
of chain pharmacies that have the same common ownership and control;
(4) Co-licensed partner," a party that, with another party or parties, has the right to engage in
the manufacturing or marketing, or both, of a co-licensed product;
(5) "Co-licensed product," a prescription drug in which two or more parties have the right to
engage in the manufacturing or marketing, or both, of a drug consistent with the United
States Food and Drug Administration's implementation of the Prescription Drug
Marketing Act (21 C.F.R. Parts 203 and 205);
(6) "DSCSA," the Drug Supply Chain Security Act as included as Part II of the Federal Drug
Quality and Security Act of 2013;
(7) "Drug," "prescription drug," any drug, including any biological product, except for blood
and blood components intended for transfusion or biological products that are also
medical devices required by federal law or federal regulation to be dispensed only by a
prescription, including finished dosage forms and bulk drug substances subject to
§ 503(b) of the Federal Food, Drug and Cosmetic Act;
(8) "Drug coupon," a form which may be redeemed at no cost or at reduced cost for a
prescription drug;
(9) "Drug Enforcement Administration," the Drug Enforcement Administration of the United
States Department of Justice;
(10) "Drug sample," a unit of a prescription drug that is not intended to be sold and is intended
to promote the sale of the drug;
(11) "Facility," a facility of a wholesale distributor where prescription drugs are stored,
handled, repackaged, or offered for sale;
(12) "Licensee," any wholesale drug distributor licensed pursuant to the provisions of this
chapter;
(13) "Manufacturer," as defined by the DSCSA;
(14) "Out-of-state wholesale drug distributor," a wholesale drug distributor with no physical
facilities located in this state;
(15) "Outsourcing facility," a facility that is engaged in compounding of nonpatient specific
sterile and nonsterile drugs that complies with § 503(b) of the Federal Food, Drug and
Cosmetic Act as of January 1, 2017, and is registered and inspected by the United States
Food and Drug Administration;
(16) "Pharmacy," a place licensed by the board under chapter 36-11 in which prescription
drugs are sold;
(17) "Repackage," repackaging or otherwise changing the container, wrapper, or labeling to
further the distribution of a prescription drug excluding that completed by the pharmacist
responsible for dispensing the drug to the patient;
(18) "Repackager," a person who repackages;
(19) "Sterile pharmaceutical," any dosage form of a drug, including parenterals, such as
injectables, surgical irrigants, and ophthalmics, devoid of viable microorganisms;
(20) "Third-party logistics provider," an entity that provides or coordinates warehousing,
distribution, or other services on behalf of a manufacturer, wholesale distributor, or
dispenser as defined in the DSCSA, but does not take title to the prescription drug or have
general responsibility to direct the prescription drug's sale or disposition;
(21) "Transaction history," a statement, in paper or electronic form, that includes the
transaction information of each prior transaction going back to the manufacturer of the
product.
Section 2. That chapter 36-11A be amended by adding a NEW SECTION to read:
As used in this chapter, the term, trading partner, means:
(1) A manufacturer, repackager, wholesale distributor, or dispenser from whom a
manufacturer, repackager, wholesale distributor, or dispenser accepts direct ownership of
a product or to whom a manufacturer, repackager, wholesale distributor, or dispenser
transfers direct ownership of a product; or
(2) A third-party logistics provider from whom a manufacturer, repackager, wholesale
distributor, or dispenser accepts direct possession of a product or to whom a
manufacturer, repackager, wholesale distributor, or dispenser transfers direct possession
of a product.
Section 3. That chapter 36-11A be amended by adding a NEW SECTION to read:
As used in this chapter, the term, transaction, means the transfer of product between trading
partners in which a change of ownership occurs. The term does not include:
(1) Intracompany distribution of any product between members of an affiliate or within a
manufacturer;
(2) The distribution of a product among hospitals or other health systems that are under
common control;
(3) The distribution of a product for emergency medical reasons, including a public health
emergency declaration pursuant to state or federal law;
(4) The dispensing of a product pursuant to a prescription;
(5) The distribution of product samples by a manufacturer or a licensed wholesale distributor
in accordance with state and federal law;
(6) The distribution of blood or blood components intended for transfusion;
(7) The distribution of minimal quantities of product by a licensed retail pharmacy to a
licensed practitioner for office use;
(8) The sale, purchase, or trade of a drug or an offer to sell, purchase, or trade a drug by a
charitable organization to a nonprofit affiliate of the organization to the extent otherwise
permitted by state and federal law;
(9) The distribution of a product pursuant to the sale or merger of a pharmacy or pharmacies
or a wholesale distributor or wholesale distributors, except that any records required to
be maintained for the product shall be transferred to the new owner of the pharmacy or
pharmacies or wholesale distributor or wholesale distributors;
(10) A combination product that is:
(a) A product composed of a device and one or more other regulated components, such
as a drug or device, biologic or device, or drug, device or biologic, that are
physically, chemically, or otherwise combined or mixed and produced as a single
entity;
(b) Two or more separate products packaged together in a single package or as a unit
and composed of a drug and device or a device and biological product; or
(c) Two or more finished medical devices plus one or more drug or biological products
that are packaged together in what is referred to as a medical convenience kit as
described in subdivision (11);
(11) The distribution of a collection of finished medical devices, which may include a product
or biological product, assembled in kit form strictly for the convenience of the purchaser
or user if:
(a) The medical convenience kit is assembled in an establishment that is registered
with the United States Food and Drug Administration as a device manufacturer;
(b) The medical convenience kit does not contain a federally scheduled controlled
substance;
(c) In the case of a medical convenience kit that includes a product, the person who
manufactured the kit purchased the product directly from the pharmaceutical
manufacturer or from a wholesale distributor that purchased the product directly
from the pharmaceutical manufacturer, and does not alter the primary container or
label of the product as purchased from the manufacturer or wholesale distributor;
and
(d) In the case of a medical convenience kit that includes a product, the product is an
intravenous solution intended for the replenishment of fluids and electrolytes; a
product intended to maintain the equilibrium of water and minerals in the body; a
product intended for irrigation or reconstitution; an anesthetic; an anticoagulant;
a vasopressor; or a sympathomimetic;
(12) The distribution of an intravenous product that, by its formulation, is intended for the
replenishment of fluids and electrolytes (such as sodium, chloride, and potassium) or
calories (such as dextrose and amino acids);
(13) The distribution of an intravenous product used to maintain the equilibrium of water and
minerals in the body, such as dialysis solutions;
(14) The distribution of a product that is intended for irrigation, or sterile water, whether
intended for such purposes or for injection;
(15) The distribution of a medical gas; or
(16) The distribution or sale of any licensed biologic product that meets the definition of
device under federal law.
Section 4. That chapter 36-11A be amended by adding a NEW SECTION to read:
As used in this chapter, the term, transaction information, means the proprietary or established
name or names of the product, the strength and dosage form of the product, the national drug code
number of the product, the container size, the number of containers, the lot number of the product,
the transaction date, the shipment date, if more than twenty-four hours after the transaction date, the
business name and address of the transferring person, and the business name and address of the
transferee person.
Section 5. That chapter 36-11A be amended by adding a NEW SECTION to read:
As used in this chapter, the term, transaction statement, means a statement, in paper or electronic
form, that the entity transferring ownership in a transaction:
(1) Is authorized under federal law;
(2) Received the product from a person who is authorized as required under federal law;
(3) Received the transaction information and transaction statement from the prior owner of
the product, as required by federal law;
(4) Did not knowingly ship a suspect or illegitimate product;
(5) Had systems and processes in place to comply with verification requirements outlined in
federal law;
(6) Did not knowingly provide false transaction information; and
(7) Did not knowingly alter the transaction history.
Section 6. That chapter 36-11A be amended by adding a NEW SECTION to read:
Each wholesale distributor and outsourcing facility located within or outside of the state that
provides services to outlets within the state, shall be licensed annually by the board. Each third-party
logistics provider located in this state shall be licensed by the board.
Section 7. That § 36-11A-2 be amended to read:
36-11A-2. As used in this chapter, the term, distribution, means the sale, purchase, trade,
delivery, handling, storage, or receipt of a product. The term does not include:
(1) Intracompany sales between any division, subsidiary, parent or otherwise affiliated or
related company under the common ownership and control of a corporate entity;
(2) The purchase or other acquisition by a hospital or other health care entity that is a member
of a group purchasing organization of a drug for its own use from the group purchasing
organization or from other hospitals or health care entities that are members of such
organizations;
(3) The sale, purchase or trade of a drug or an offer to sell, purchase or trade a drug by a
charitable organization described in § 501(c)(3) of the Internal Revenue Code of 1954,
as amended through December 18, 2015, to a nonprofit affiliate of the organization to the
extent otherwise permitted by law;
(4) The sale, purchase or trade of a drug or an offer to sell, purchase or trade a drug among
hospitals or other health care entities that are under common control;
(5) The sale, purchase or trade of a drug, or an offer to sell, purchase or trade a drug, for
emergency medical reasons;
(6) The sale, purchase or trade of a drug, an offer to sell, purchase or trade a drug, or the
dispensing of a drug pursuant to a prescription;
(7) The transfer of drugs by a pharmacy to another pharmacy to alleviate a temporary
shortage;
(8) The distribution of drug samples by manufacturers' representatives or distributors'
representatives;
(9) The sale, purchase, or trade of blood and blood components intended for transfusion;
(10) The sale, purchase, or trade of a drug to an individual under any form of insurance or an
employee medical benefit program pursuant to a prescription; or
(11) The logistics and warehouse services provided by a third-party logistics provider.
Section 8. That chapter 36-11A be amended by adding a NEW SECTION to read:
No outsourcing facility engaged in compounding of nonpatient specific sterile and nonsterile
drugs may become licensed by the board without first obtaining a registration and inspection by the
United States Food and Drug Administration, and paying the license fee set by the board in rules
promulgated pursuant to chapter 1-26. The fee may not exceed two hundred dollars.
Section 9. That § 36-11A-5 be amended to read:
36-11A-5. No person, other than a consumer or patient, may knowingly purchase or receive a
prescription drug from any source other than a drug distributor or pharmacy licensed by the board
under this chapter or chapter 36-11, as applicable.
Any person who violates this section is guilty of a Class 1 misdemeanor for the first conviction
and a Class 6 felony for any subsequent conviction.
Section 10. That § 36-11A-7 be amended to read:
36-11A-7. No person or distribution outlet may engage in the wholesale distribution of
prescription drugs in this state unless that person or outlet is licensed by the board as a drug
distributor in accordance with the minimum standards, conditions and terms set forth in this chapter
and in rules adopted pursuant to chapter 1-26.
An agent or employee of a licensed drug distributor need not seek licensure under this chapter
and may lawfully possess prescription drugs when the agent or employee is acting in the usual course
of business or employment.
Any person who violates this section is guilty of a Class 6 felony.
Section 11. That § 36-11A-13 be amended to read:
36-11A-13. Each wholesale drug distributor license expires on December thirty-first following
the date of issue. The board shall provide an application for license renewal to each licensee before
December first of each year. If application for renewal of the license accompanied by the annual
license fee is not made before the expiration date, the existing license lapses on the date of
expiration.
Section 12. That § 36-11A-14 be amended to read:
36-11A-14. The board shall promulgate rules, pursuant to chapter 1-26, pertaining to:
(1) Application procedures and information required for initial application and for renewal
of license;
(2) Treatment of confidential materials;
(3) Qualification of applicants;
(4) Temporary licensure;
(5) Licensure by reciprocity;
(6) Annual license fee;
(7) Requirements for storing and handling prescription drugs;
(8) Record keeping;
(9) Liability insurance;
(10) Security systems and procedures;
(11) Personnel;
(12) Policies and procedures;
(13) Inspection of incoming and outgoing product shipments by licensees;
(14) Conduct of inspections by the board; and
(15) Due process.
Section 13. That § 36-11A-15 be repealed.
Section 14. That § 36-11A-16 be amended to read:
36-11A-16. For the purpose of conducting an inspection, persons authorized by the board and
showing identification may enter during normal business hours all premises in this state purporting
or appearing to be used by a drug distributor. No person may deny the right of entry as provided in
this section to an authorized person. Any licensee who provides documentation of the most recent
satisfactory inspection that is less than two years old by either the United States Food and Drug
Administration or a state agency, if it is determined to be comparable by the board, is exempt from
further inspection for a period of time to be determined by the board. This exemption does not bar
the board from initiating an investigation pursuant to a public or governmental complaint received
by the board regarding a wholesale drug distributor.
Any person who violates this section is guilty of a Class 1 misdemeanor for the first conviction
and a Class 6 felony for any subsequent conviction.
Section 15. That § 36-11A-17 be amended to read:
36-11A-17. A licensee may keep records at a central location apart from the principal office of
the wholesale drug distributor or the location at which the drugs were stored and from which the
drugs were shipped if the records are made available for inspection within two working days after
a request by the board. Records may be kept in any form permissible under rules adopted by the
board pursuant to chapter 1-26. Records shall be kept at least six years.
Section 16. That § 36-11A-24 be amended to read:
36-11A-24. For the purposes of §§ 36-11A-20 to 36-11A-46, inclusive, a third party logistics
provider is any person who contracts with a prescription drug manufacturer to provide or coordinate
warehousing, distribution, or other services on behalf of a manufacturer, but does not take title to
the prescription drug or have general responsibility to direct the prescription drug's sale or
disposition. Any third party logistics provider shall be licensed under §§ 36-11A-20 to 36-11A-46,
inclusive.
Section 17. That § 36-11A-25 be amended to read:
36-11A-25. For the purposes of §§ 36-11A-20 to 36-11A-46, inclusive, a wholesale distributor
is any person other than a manufacturer, a manufacturer's co-licensed partner, a third-party logistics
provider or repackager, engaged in wholesale distribution.
Section 18. That § 36-11A-26 be repealed.
Section 19. That § 36-11A-34 be amended to read:
36-11A-34. A wholesale distributor shall receive prescription drug returns or exchanges from
a pharmacy or chain pharmacy warehouse pursuant to the terms and conditions of the agreement
between the wholesale distributor and the pharmacy or chain pharmacy warehouse. Returns of
expired, damaged, recalled, or otherwise nonsaleable pharmaceutical products shall be distributed
by the receiving wholesale distributor only to either the original manufacturer or a third party returns
processor. The returns or exchanges of prescription drugs, saleable or otherwise, including any
redistribution by a receiving wholesaler, are not subject to the requirement of § 36-11A-39, so long
as prescription drugs are exempt from tracing requirements under DSCSA. Wholesale distributors
and pharmacies shall be held accountable for administering their returns process and ensuring that
the aspects of this operation are secure and do not permit the entry of adulterated and counterfeit
product.
Section 20. That § 36-11A-36 be amended to read:
36-11A-36. Prescription drugs furnished by a licensee shall be delivered only to the premises
listed on the license. However, the licensee may furnish prescription drugs to an authorized person
or agent of that person at the premises of the manufacturer or wholesale distributor if:
(1) The identity and authorization of the recipient is properly established; and
(2) This method of receipt is employed only to meet the immediate needs of a particular
patient of the authorized person.
Section 21. That § 36-11A-39 be repealed.
Section 22. That § 36-11A-40 be repealed.
Section 23. That § 36-11A-41 be amended to read:
36-11A-41. Each trading partner who is engaged in the wholesale distribution of a prescription
drug including repackagers, but excluding a third-party logistics provider and the original
manufacturer of the finished form of the prescription drug, who is provided transaction information,
transaction history, and a transaction statement for a prescription drug and attempts to further
distribute that prescription drug, shall, before any distribution of a prescription drug occurs, confirm
that it has received the transaction information, transaction history, and transaction statement.
Section 24. That § 36-11A-42 be repealed.
Section 25. That § 36-11A-43 be repealed.
Section 26. That § 36-11A-44 be amended to read:
36-11A-44. Each file shall be:
(1) Maintained by the purchaser and the licensee for six years from the date of the
transaction; and
(2) Available for inspection or use within two business days upon a request of an authorized
officer of the law.
Section 27. That § 36-11A-45 be amended to read:
36-11A-45. The board shall issue an order requiring the appropriate person including any
distributor or retailer of the drug to immediately cease distribution of the drug within this state if the
board finds that there is a reasonable probability that:
(1) A wholesale distributor, other than a manufacturer, has:
(a) Violated a provision of §§ 36-11A-20 to 36-11A-46, inclusive; or
(b) Falsified a transaction document, or sold, distributed, transferred, manufactured,
repackaged, handled, or held a counterfeit prescription drug intended for human
use;
(2) The prescription drug at issue as a result of a violation in subdivision (1) could cause
serious, adverse health consequences or death; and
(3) Other procedures would result in unreasonable delay.
An order under this section shall provide the person subject to the order with an opportunity for
an informal hearing, to be held not later than ten days after the date of the issuance of the order, on
the actions required by the order. If, after providing an opportunity for such a hearing, the board
determines that inadequate grounds exist to support the actions required by the order, the board shall
vacate the order.
Section 28. That § 36-11A-46 be amended to read:
36-11A-46. It is unlawful for a person to perform or cause the performance of or aid and abet any
of the following acts in this state:
(1) Failure to obtain a license in accordance with §§ 36-11A-20 to 36-11A-46, inclusive, or
operating without a valid license when a license is required by §§ 36-11A-20 to 36-11A-46, inclusive;
(2) If the requirements of § 36-11A-34 are applicable and are not met, the purchasing or
otherwise receiving a prescription drug from a pharmacy;
(3) If a state license is required pursuant to § 36-11A-35, the sale, distribution, or transfer of
a prescription drug to a person that is not authorized under the law of the jurisdiction in
which the person receives the prescription drug to receive the prescription drug;
(4) Failure to deliver prescription drugs to specified premises, as required by § 36-11A-36;
(5) Accepting payment or credit for the sale of prescription drugs in violation of § 36-11A-38;
(6) Failure to maintain or provide transaction documentation as required by §§ 36-11A-20 to
36-11A-46, inclusive;
(7) Failure to obtain, pass, or verify transaction documentation, as required by §§ 36-11A-20
to 36-11A-46, inclusive;
(8) Providing the state or any of its representatives or any federal official with false or
fraudulent records or making false or fraudulent statements regarding any matter within
the provisions of §§ 36-11A-20 to 36-11A-46, inclusive;
(9) Obtaining or attempting to obtain a prescription drug by fraud, deceit, misrepresentation
or engaging in misrepresentation or fraud in the distribution of a prescription drug;
(10) Except for the wholesale distribution by manufacturers of a prescription drug that has
been delivered into commerce pursuant to an application approved under federal law by
the United States Food and Drug Administration, the manufacture, repacking, sale,
transfer, delivery, holding, or offering for sale any prescription drug that is adulterated,
misbranded, counterfeit, suspected of being counterfeit, or has otherwise been rendered
unfit for distribution;
(11) Except for the wholesale distribution by manufacturers of a prescription drug that has
been delivered into commerce pursuant to an application approved under federal law by
the United States Food and Drug Administration, the adulteration, misbranding, or
counterfeiting of any prescription drug;
(12) The receipt of any prescription drug that is adulterated, misbranded, stolen, obtained by
fraud or deceit, counterfeit, or suspected of being counterfeit, and the delivery or proffered
delivery of such drug for pay or otherwise; and
(13) The alteration, mutilation, destruction, obliteration, or removal of the whole or any part
of the labeling of a prescription drug or the commission of any other act with respect to
a prescription drug that results in the prescription drug being misbranded.
Any person who violates this section is guilty of a Class 1 misdemeanor for the first conviction
and a Class 6 felony for any subsequent conviction.
An Act to revise certain provisions regarding wholesale drug distributors, to provide for licensure
and regulation of outsourcing facilities for certain drugs, and to establish a fee for licensure of
outsourcing facilities.
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I certify that the attached Act
originated in the
HOUSE as Bill No. 1044
____________________________
Chief Clerk
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____________________________
Speaker of the House
____________________________
Chief Clerk
____________________________
President of the Senate
____________________________
Secretary of the Senate
House Bill No. 1044
File No. ____
Chapter No. ______
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Received at this Executive Office
this _____ day of _____________ ,
20____ at ____________ M.
By _________________________
for the Governor
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The attached Act is hereby
approved this ________ day of
______________ , A.D., 20___
____________________________
Governor
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STATE OF SOUTH DAKOTA,
ss.
Office of the Secretary of State
Filed ____________ , 20___
at _________ o'clock __ M.
____________________________
Secretary of State
By _________________________
Asst. Secretary of State
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