The DSCSA has had wide-ranging implications on state regulation of the pharmaceutical supply chain. But are some states using it as an opportunity to increase their oversight which has resulted in onerous requirements for the industry?
Background
In early 2019, Vermont officially overhauled their license types to align with the FDA’s definition of wholesale distributor by breaking out a separate license type for manufacturers (see their policy here). Specifically, Vermont defined, and began to require licensure for, Virtual Manufacturers, Virtual Distributors, Contract Manufacturers, Repackagers, Relabelers, and Brokers.
Per the Board, the motivation was that the most recent federal definition (per the DSCSA Title II) of `wholesale distributor’ explicitly excluded “a manufacturer, a manufacturer’s co- licensed partner, a third-party logistics provider, [and] repackager.”
Controversy
However, in a move similar to Nevada and Arizona, Vermont took it one step further – they explicitly state that it’s their “expectation that all entities involved in the drug supply chain that results in prescription drugs entering Vermont shall be licensed.”
This, possibly unfairly, requires companies that do not sell into the state of Vermont to obtain a license. Although the state only has a population of .1% of the USA, the policy will likely affect virtually all Virtual Manufacturers, Contract Manufacturers, Repackagers and Relabelers, generating millions of dollars of revenue annually.
We have received consistent feedback from industry, both trade groups, and actual clients, that Vermont’s interpretation is unconstitutional and should be overturned. Although a legal showdown would be interesting, my bet is that companies will simply pay the $700 per year.
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Haven’t FL and IL been doing that for years? I am pretty sure they aren’t the only ones either. Several states have fined manufacturers for not being licensed in their state, when their products end up being sold into the state by a third party.
Yes, exactly right – there are a handful of states with similar licensing requirements. The article is just touching on this continuing/growing trend as some industry participants weigh whether it is worth the fight or not.
-Sumeet
It’s better than being taxed correct? Our suggestion for those companies (including PBMs) who conduct business within state but do not reside or have an office within in the state to be taxed. Why should we allow Vermont dollars to leave our state and not keep some of the money nor make sure those companies be regulated like those that are in state? Most of the time those tax burdens are relied upon local businesses. Pay the fee, get registered like the rest of us.
Hi Jason!
This article specifically covers those companies that are not doing business in Vermont.
For example, take the following scenario: a manufacturer in Pennsylvania sells/ships to a wholesaler in New York; and that wholesaler in turn sells/ships to a pharmacy in Vermont. While the case for a license requirement for both the pharmacy located in Vermont and the New York wholesaler selling/shipping into Vermont is clear, the manufacturer in Pennsylvania is also being required to obtain a license.
To examine the scope of the requirement – there are over 11,000 “labelers” with NDC’s listed on the FDA website, which doesn’t even include contract manufacturers!
The question really becomes – does Vermont have the jurisdiction to require licensure?