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H.B. 354






Sponsor: Bradley G. Last

             7      LONG TITLE
             8      General Description:
             9          This bill amends the Pharmacy Practice Act to increase the regulation of pharmaceutical
             10      wholesalers and distributors.
             11      Highlighted Provisions:
             12          This bill:
             13          .    defines terms;
             14          .    establishes licensing requirements;
             15          .    establishes restriction on pharmaceutical transactions;
             16          .    requires the use of drug pedigrees;
             17          .    establishes enforcement mechanisms;
             18          .    describes prohibited acts; and
             19          .    imposes penalties.
             20      Monies Appropriated in this Bill:
             21          None
             22      Other Special Clauses:
             23          This bill takes effect on July 1, 2005.
             24      Utah Code Sections Affected:
             25      AMENDS:
             26          58-17b-503, as enacted by Chapter 280, Laws of Utah 2004
             27          58-17b-505, as enacted by Chapter 280, Laws of Utah 2004

             28      ENACTS:
             29          58-17b-801, Utah Code Annotated 1953
             30          58-17b-802, Utah Code Annotated 1953
             31          58-17b-803, Utah Code Annotated 1953
             32          58-17b-804, Utah Code Annotated 1953
             33          58-17b-805, Utah Code Annotated 1953
             34          58-17b-806, Utah Code Annotated 1953
             35          58-17b-807, Utah Code Annotated 1953
             36          58-17b-808, Utah Code Annotated 1953
             37      REPEALS:
             38          58-17b-617, as enacted by Chapter 280, Laws of Utah 2004
             40      Be it enacted by the Legislature of the state of Utah:
             41          Section 1. Section 58-17b-503 is amended to read:
             42           58-17b-503. Exception to unprofessional conduct.
             43          (1) For purposes of this section:
             44          (a) "ICFMR" means an intermediate care facility for the mentally retarded licensed as a
             45      nursing care facility or a small health care facility under Title 26, Chapter 21, Health Care
             46      Facility Licensing and Inspection Act.
             47          (b) "Nursing care facility" has the same definition as in Section 26-21-2 .
             48          (c) "Unit pack" means a single dose-single drug package which identification indicates
             49      the lot number and expiration date for the drug.
             50          (2) Notwithstanding the provisions of Subsection 58-17b-502 (5) and Part 8,
             51      Pharmaceutical Wholesaler and Distributor Regulation Act, a pharmacist may accept back and
             52      redistribute any unused drug, or a part of it, after it has left the premises of the pharmacy if:
             53          (a) the drug was prescribed to a patient in a nursing care facility, an ICFMR, or state
             54      prison facility, county jail, or state hospital;
             55          (b) the drug was stored under the supervision of a licensed health care provider
             56      according to manufacturer recommendations;
             57          (c) the drug is in a unit pack or in the manufacturer's sealed container;
             58          (d) the drug was returned to the original dispensing pharmacy;

             59          (e) the drug was initially dispensed by a licensed pharmacist or licensed pharmacy
             60      intern; and
             61          (f) accepting back and redistribution of the drug complies with Federal Food and Drug
             62      Administration and Drug Enforcement Administration regulations.
             63          Section 2. Section 58-17b-505 is amended to read:
             64           58-17b-505. Educational and enforcement fund.
             65          (1) The director may use the money collected pursuant to [Section] Sections
             66      58-17b-504 and 58-17b- 808 for the following purposes:
             67          (a) education and training of licensees under this chapter;
             68          (b) enforcement of this chapter by:
             69          (i) investigating unprofessional or unlawful conduct;
             70          (ii) providing legal representation to the division when legal action is taken against a
             71      person engaging in unprofessional or unlawful conduct;
             72          (iii) monitoring compliance of renewal requirement; and
             73          (iv) education and training of division staff and board members.
             74          (2) All funding for the purposes listed in Subsection (1) is nonlapsing.
             75          (3) Any penalty which is not paid may be collected by the director by either referring
             76      the matter to a collection agency or bringing an action in the district court of the county in
             77      which the person against whom the penalty is imposed resides or in the county where the office
             78      of the director is located.
             79          (4) Any county attorney or the attorney general of the state is to provide legal
             80      assistance and advice to the director in any action to collect the penalty. In any action brought
             81      to enforce the provisions of this section, reasonable attorney's fees and costs shall be awarded
             82      in which the person against whom the penalty is imposed resides or in the county where the
             83      office of the director is located.
             84          Section 3. Section 58-17b-801 is enacted to read:
Part 8. Pharmaceutical Wholesaler and Distributor Regulation Act

             86          58-17b-801. Title.
             87          This part is known as the "Pharmaceutical Wholesaler and Distributor Regulation Act."
             88          Section 4. Section 58-17b-802 is enacted to read:
             89          58-17b-802. Definitions.

             90          In addition to the definitions in Section 58-17b-102 , for purposes of this part:
             91          (1) "Authentication" means to affirmatively verify before any distribution of a
             92      prescription drug occurs that each transaction listed on the pedigree has occurred.
             93          (2) "Facility" means a facility of a wholesale distributor where prescription drugs are
             94      stored, handled, repackaged, or offered for sale.
             95          (3) "Immediate family" includes a person's spouse, children, parents, siblings, the
             96      spouses of a person's children, and the spouses of a person's siblings.
             97          (4) "Normal distribution channel" means a chain of custody for a prescription drug that
             98      goes from a manufacturer, to a pharmaceutical wholesaler and distributor, to a pharmacy, to a
             99      patient.
             100          (5) "Pedigree" means a document or electronic file containing information that records
             101      each distribution of any given prescription drug, from sale by a pharmaceutical manufacturer,
             102      through acquisition and sale by any pharmaceutical wholesaler and distributor or repackager,
             103      until final sale to a pharmacy, or other person dispensing or administering the prescription
             104      drug.
             105          (6) "Repackage" includes repackaging or otherwise changing the container, wrapper, or
             106      labeling to further the distribution of a prescription drug.
             107          Section 5. Section 58-17b-803 is enacted to read:
             108          58-17b-803. Pharmaceutical wholesaler and distributor licensing requirement.
             109          (1) Every pharmaceutical wholesaler and distributor who engages in the wholesale
             110      distribution of prescription drugs into this state must be licensed by the state in which it
             111      resides, before engaging in wholesale distributions of wholesale prescription drugs into this
             112      state.
             113          (2) The division shall require the following minimum information from each
             114      pharmaceutical wholesaler or distributer applying to get a license under Subsection (1) and as
             115      part of any renewal of any license:
             116          (a) the name, full business address, and telephone number of the licensee;
             117          (b) all trade or business names used by the licensee;
             118          (c) addresses, telephone numbers, and the names of contact persons for all facilities
             119      used by the licensee for the storage, handling, and distribution of prescription drugs;
             120          (d) the type of ownership or operation;

             121          (e) the name of the owner and operator of the licensee, including:
             122          (i) if a person, the name of the person;
             123          (ii) if a partnership, the name of each partner, and the name of the partnership;
             124          (iii) if a corporation, the name and title of each corporate officer and director, the
             125      corporate names, and the name of the state of incorporation; and
             126          (iv) if a sole proprietor, the full name of the sole proprietor and the name of the
             127      business entity;
             128          (f) a list of all licenses and permits issued to the licensee by any other state that
             129      authorizes the licensee to purchase or possess prescription drugs;
             130          (g) the name of the manager of the facility that is applying for the initial license, or to
             131      renew the license, the next four highest ranking employees responsible for prescription drug
             132      wholesale operations for the facility, and the name of all affiliated parties for the facility,
             133      together with the personal information statement and fingerprints required pursuant to
             134      Subsection (2)(i) for each such persons;
             135          (h) the name of the licensee's designated representative for the facility in accordance
             136      with Subsection (4), together with the personal information statement and fingerprints, required
             137      pursuant to Subsection (2)(i) for the designated representative; and
             138          (i) each person required by Subsections (2)(g) and (h) to provide a personal
             139      information statement and fingerprints shall provide the following information to the division:
             140          (i) the person's places of residence for the past seven years;
             141          (ii) the person's date and place of birth;
             142          (iii) the person's occupations, positions of employment, and offices held during the past
             143      seven years;
             144          (iv) the principal business and address of any business, corporation, or other
             145      organization in which the person held a position or was employed under Subsection (2)(h)(iii);
             146          (v) whether the person has been, during the past seven years, the subject of any
             147      proceeding for the revocation of any license and, if so, the nature of the proceeding and the
             148      disposition of the proceeding;
             149          (vi) whether, during the past seven years, the person has been enjoined, either
             150      temporarily or permanently, by a court of competent jurisdiction from violating any federal or
             151      state law regulating the possession, control, or distribution of prescription drugs, together with

             152      details concerning any such event;
             153          (vii) (A) a description of any involvement or investments by the person during the past
             154      seven years with any business:
             155          (I) that manufactured, administered, prescribed, distributed, or stored pharmaceutical
             156      products; or
             157          (II) that was named as a party in a lawsuit during the past seven years; and
             158          (B) Subsection (2)(i)(vii)(A) does not include any ownership of stock in a publicly
             159      traded company or mutual fund;
             160          (viii) (A) a description of any felony criminal offense of which the person, as an adult,
             161      was found guilty, regardless of whether adjudication or guilt was withheld or whether the
             162      person pled guilty or nolo contendere; and
             163          (B) if the person indicates that a criminal conviction is under appeal and submits a
             164      copy of the notice of appeal of that criminal offense, the applicant must, within 15 days after
             165      the disposition of the appeal, submit to the division a copy of the final written order of
             166      disposition; and
             167          (ix) a photograph of the person taken in the previous 30 days.
             168          (3) The information required pursuant to Subsection (2) shall be provided under oath.
             169          (4) The division shall not issue or renew a pharmaceutical wholesaler and distributor
             170      license of a licensee, unless the division determines that the designated representative required
             171      under Subsection (2)(h) meets the following qualifications:
             172          (a) is at least 21 years of age;
             173          (b) has been employed full time for at least three years in a pharmacy or with a
             174      pharmaceutical wholesaler and distributor in a capacity related to the dispensing and
             175      distribution of, and recordkeeping relating to, prescription drugs;
             176          (c) has received a score of 75% or more on an examination given by the division
             177      regarding federal and state laws governing wholesale distribution of prescription drugs, which
             178      test shall be retaken each time the licensee lists the person as the designated representative in
             179      an application for license or renewal of a license;
             180          (d) is employed by the licensee full time in a managerial level position;
             181          (e) is actively involved in and aware of the actual daily operation of the pharmaceutical
             182      wholesaler and distributor;

             183          (f) is physically present at the facility of the licensee during regular business hours,
             184      except when the absence of the designated representative is authorized, including sick leave
             185      and vacation leave;
             186          (g) is serving in the capacity of a designated representative for only one licensee at a
             187      time;
             188          (h) does not have any convictions under any federal, state, or local laws relating to
             189      wholesale or retail prescription drug distribution of controlled substances; and
             190          (i) does not have any felony convictions under federal, state, or local laws.
             191          (5) The division shall submit the fingerprints provided by a person with an initial or a
             192      renewal license application for a statewide and national criminal background check.
             193          (6) (a) The division shall:
             194          (i) require every pharmaceutical wholesaler and distributor applying for a new license
             195      or the renewal of a license to submit a bond to the division in an amount established by the
             196      division by administrative rule; or
             197          (ii) other equivalent means of security acceptable to the division including an
             198      irrevocable letter of credit or a deposit in a trust account or financial institution, payable to a
             199      fund established by the division pursuant to Subsection (7).
             200          (b) (i) The purpose of the bond required by this Subsection (6) is to secure payment of:
             201          (A) any fines or penalties lawfully imposed by the division against a licensee for
             202      violating this part;
             203          (B) any fees and costs incurred by the division enforcing this part; and
             204          (C) any costs incurred by the state as a result of the licensee's violation of this part.
             205          (ii) The bond may be used by the state if the licensee fails to pay any fines, penalties, or
             206      costs imposed under Subsection (6)(b)(i) within 30 days after the imposition of the fine is final.
             207          (c) The state may make a claim against such bond or security until one year after the
             208      licensee's license ceases to be valid.
             209          (7) The division shall establish a fund, separate from its other accounts, in which to
             210      deposit the pharmaceutical wholesaler and distributor bonds.
             211          (8) If a pharmaceutical wholesaler and distributor distributes prescription drugs from
             212      more than one facility, the pharmaceutical wholesaler and distributor shall obtain a license for
             213      each facility.

             214          (9) Changes in any information in Subsection (2) shall be submitted to the division as
             215      required by the division by administrative rule adopted in accordance with Title 63, Chapter
             216      46a, Utah Administrative Rulemaking Act.
             217          Section 6. Section 58-17b-804 is enacted to read:
             218          58-17b-804. Minimum restrictions on transactions.
             219          (1) In any calendar month, a pharmaceutical wholesaler and distributor shall sell,
             220      distribute, or otherwise transfer at least 95% of its total amount of prescription drugs to a
             221      pharmacy or other person dispensing or administering the drug.
             222          (2) (a) A pharmaceutical wholesaler and distributor shall not purchase or otherwise
             223      receive a prescription drug from a pharmacy, except that a pharmaceutical wholesaler and
             224      distributor may receive a prescription drug from a pharmacy if the prescription drug was
             225      originally purchased by the pharmacy from the pharmaceutical wholesaler and distributor.
             226          (b) A pharmaceutical wholesaler and distributor who meets the exception in
             227      Subsection (2)(a) shall not:
             228          (i) receive from a pharmacy an amount or quantity of a prescription drug larger than the
             229      amount or quantity that was originally sold by the pharmaceutical wholesaler and distributor to
             230      the pharmacy; or
             231          (ii) pay the pharmacy an amount, either in cash or credit, more than the pharmacy
             232      originally paid the pharmaceutical wholesaler and distributor for the prescription drug.
             233          (3) A manufacturer or pharmaceutical wholesaler and distributor shall furnish
             234      prescription drugs only to a person licensed by the appropriate state licensing authorities.
             235      Before furnishing prescription drugs to a person not known to the manufacturer or
             236      pharmaceutical wholesaler and distributor, the manufacturer or pharmaceutical wholesaler and
             237      distributor shall affirmatively verify that the person is legally authorized to receive the
             238      prescription drugs by contacting the appropriate state licensing authorities.
             239          (4) (a) Prescription drugs furnished by a manufacturer or pharmaceutical wholesaler
             240      and distributor shall be delivered only to the premises listed on the license, provided that the
             241      manufacturer or pharmaceutical wholesaler and distributor may furnish prescription drugs to an
             242      authorized person or agent of that person at the premises of the manufacturer or pharmaceutical
             243      wholesaler and distributor if:
             244          (i) the identity and authorization of the recipient is properly established; and

             245          (ii) this method of receipt is employed only to meet the immediate needs of a particular
             246      patient of the authorized person.
             247          (b) Prescription drugs may be furnished to a hospital pharmacy receiving area provided
             248      that a pharmacist or authorized receiving personnel signs, at the time of delivery, a receipt
             249      showing the type and quantity of the prescription drug received. Any discrepancy between the
             250      receipt and the type and quantity of the prescription drug actually received shall be reported to
             251      the delivering manufacturer or pharmaceutical wholesaler and distributor by the next business
             252      day after the delivery to the pharmacy receiving area.
             253          (5) A manufacturer or pharmaceutical wholesaler and distributor shall not accept
             254      payment for, or allow the use of, a person or entity's credit to establish an account for the
             255      purchase of prescription drugs from any person other than the owner of record, the chief
             256      executive officer, or the chief financial officer listed on the license of a person or entity legally
             257      authorized to receive prescription drugs. Any account established for the purchase of
             258      prescription drugs must bear the name of the licensee.
             259          Section 7. Section 58-17b-805 is enacted to read:
             260          58-17b-805. Pedigree.
             261          (1) (a) Each person who is engaged in the wholesale distribution of a prescription drug,
             262      including repackagers, but excluding the original manufacturer of the finished form of the
             263      prescription drug, shall provide a pedigree or electronic file identifying each sale, trade, or
             264      transfer of a prescription drug when a prescription drug leaves the normal distribution channel
             265      and is sold, traded, or transferred to any other person.
             266          (b) If a pharmacy sells a drug to any person that is not the final consumer, the
             267      pharmacy shall provide to the person acquiring the prescription drug a pedigree identifying
             268      each sale, trade, or transfer of the prescription drug.
             269          (c) Sale, trade, or transfer of a prescription drug between licensees with a common
             270      ownership, or to meet emergency needs are not subject to this Subsection (1).
             271          (2) Each person who is engaged in the wholesale distribution of a prescription drug,
             272      including repackagers, but excluding the original manufacturer of the finished form of the
             273      prescription drug, who is in possession of a pedigree for a prescription drug and attempts to
             274      further distribute that prescription drug, shall affirmatively verify before any distribution of a
             275      prescription drug occurs that each transaction listed on the pedigree has occurred.

             276          (3) (a) The pedigree required by this section shall include all necessary identifying
             277      information concerning each sale in the chain of distribution of the product from the
             278      manufacturer, through acquisition and sale by any pharmaceutical wholesaler and distributor,
             279      or repackager, until final sale to a pharmacy or other person dispensing or administering the
             280      drug.
             281          (b) At minimum, the necessary chain of distribution information required by
             282      Subsection (3)(a) shall include the:
             283          (i) name, address, telephone number, and if available, the email address, of each owner
             284      of the prescription drug, and each pharmaceutical wholesaler and distributor who does not take
             285      title to the prescription drug;
             286          (ii) signature of each owner of the prescription drug and each pharmaceutical
             287      wholesaler and distributor who does not take title to the prescription drug;
             288          (iii) name and address of each location from which the product was shipped, if
             289      different from the owner's;
             290          (iv) transaction dates; and
             291          (v) certification that each recipient has authenticated the pedigree.
             292          (c) The pedigree shall also include the:
             293          (i) name of the prescription drug;
             294          (ii) dosage form and strength of the prescription drug;
             295          (iii) size of the container;
             296          (iv) number of containers;
             297          (v) lot number of the prescription drug; and
             298          (vi) name of the manufacturer of the finished dosage form.
             299          (4) Each pedigree statement required by this section shall be:
             300          (a) maintained by the purchaser and the pharmaceutical wholesaler and distributor for
             301      three years; and
             302          (b) available for inspection or removal upon a request of an authorized officer of the
             303      law.
             304          (5) The division shall adopt administrative rules and a form in accordance with Title
             305      63, Chapter 46a, Utah Administrative Rulemaking Act, relating to the requirements of this part
             306      no later than 90 days after the effective date of this part.

             307          Section 8. Section 58-17b-806 is enacted to read:
             308          58-17b-806. Enforcement -- Order to cease distribution of a drug.
             309          (1) If the division finds that there is a reasonable probability that:
             310          (a) a pharmaceutical wholesaler and distributor has:
             311          (i) knowingly violated a provision of this part or a rule adopted in accordance with this
             312      part; or
             313          (ii) falsified a pedigree, or knowingly sold, distributed, transferred, manufactured,
             314      repackaged, handled, or held a counterfeit prescription drug intended for human use;
             315          (b) the prescription drug at issue in Subsection (1)(a) could cause serious, adverse
             316      health consequences or death; and
             317          (c) other procedures would result in unreasonable delay, the division shall issue an
             318      order in accordance with Title 63, Chapter 46b, Administrative Procedures Act, requiring the
             319      appropriate person, including manufacturers, pharmaceutical wholesalers and distributors, or
             320      retailers of the drug, to immediately cease distribution of the drug.
             321          (2) An order under Subsection (1) is subject to review in accordance with Title 63,
             322      Chapter 46b, Administrative Procedures Act.
             323          Section 9. Section 58-17b-807 is enacted to read:
             324          58-17b-807. Prohibited acts.
             325          It is unlawful for a person to perform, or cause the performance of, or aid and abet any
             326      of the following acts in this state:
             327          (1) failure to obtain a license in accordance with this part or operating without a valid
             328      license when a license is required by this part;
             329          (2) selling, distributing, transferring, or otherwise providing prescription drugs in
             330      violation of the 5% rule established in Subsection 58-17b-804 (1);
             331          (3) purchasing or otherwise receiving a prescription drug from a pharmacy, unless the
             332      requirements in Subsection 58-17b-804 (2) are met;
             333          (4) the sale, distribution, or transfer of a prescription drug to a person that is not
             334      authorized under the law of the jurisdiction in which the person receives the prescription drug
             335      to receive the prescription drug, in violation of Subsection 58-17b-804 (3);
             336          (5) failure to deliver prescription drugs to specified premises, as required by
             337      Subsection 58-17b-804 (4);

             338          (6) accepting payment or credit for the sale of prescription drugs in violation of
             339      Subsection 58-17b-804 (5);
             340          (7) failure to maintain or provide a drug pedigree as required by this part;
             341          (8) failure to obtain, pass, or authenticate a pedigree, as required by this part;
             342          (9) providing the state or any of its representatives or any federal official with false or
             343      fraudulent records or making false or fraudulent statements regarding any matter within the
             344      provisions of this part;
             345          (10) obtaining or attempting to obtain a prescription drug by fraud, deceit,
             346      misrepresentation or engaging in misrepresentation, or fraud in the distribution of a
             347      prescription drug;
             348          (11) the manufacture, repacking, sale, transfer, delivery, holding, or offering for sale
             349      any prescription drug that is adulterated, misbranded, counterfeit, suspected of being
             350      counterfeit, or has otherwise been rendered unfit for distribution;
             351          (12) the adulteration, misbranding, or counterfeiting of any prescription drug;
             352          (13) the receipt of any prescription drug that is adulterated, misbranded, stolen,
             353      obtained by fraud or deceit, counterfeit, or suspected of being counterfeit, and the delivery or
             354      proffered delivery of such drug for pay or otherwise; or
             355          (14) the alteration, mutilation, destruction, obliteration, or removal of the whole or any
             356      part of the labeling of a prescription drug or the commission of any other act with respect to a
             357      prescription drug that results in the prescription drug being misbranded.
             358          Section 10. Section 58-17b-808 is enacted to read:
             359          58-17b-808. Penalties.
             360          (1) Notwithstanding the provisions of Section 58-17b-504 , a person is guilty of a
             361      second degree felony and is subject to imprisonment under Section 76-3-203 and a fine of not
             362      more than $50,000 per violation if that person knowingly engages in the wholesale distribution
             363      of a prescription drug in violation of this part or any rule or order adopted under this part.
             364          (2) If a person is an organization, it shall, upon conviction of violating this part, be
             365      subject to a fine of not more than $500,000.
             366          (3) Circumstantial evidence may be used to prove that a defendant possessed actual
             367      knowledge, including evidence that the defendant took affirmative steps to be shielded from
             368      receiving relevant information.

             369          (4) Penalties and fines imposed under this part shall be deposited into the education
             370      and enforcement fund created in Section 58-17b-505 .
             371          Section 11. Repealer.
             372          This bill repeals:
             373          Section 58-17b-617, Limitations on distribution of prescription drugs by
             374      pharmaceutical manufacturers or wholesalers.
             375          Section 12. Effective date.
             376          This bill takes effect on July 1, 2005.

Legislative Review Note
    as of 2-14-05 4:05 PM

Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.

Office of Legislative Research and General Counsel

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