201 KAR 2:105. Licensing and drug distribution requirements for drug manufacturers and wholesalers.

201 KAR 2:105. Licensing and drug distribution requirements for drug manufacturers and wholesalers.

RELATES TO: KRS 315.010, 315.036, 21 C.F.R. 205.1-205.7

STATUTORY AUTHORITY: KRS 315.010, 315.036, 315.191(1)

NECESSITY, FUNCTION, AND CONFORMITY: KRS 315.036 authorizes the board to promulgate administrative regulations to regulate the manufacturers and wholesalers of drugs. It also authorizes the board to require by administrative regulation, the maintenance of accurate records of all drugs manufactured, received and sold. This administrative regulation establishes the requirements for the regulation of manufacturers and wholesalers.

Section 1. Definitions. (1) "Blood" means whole blood collected from a single donor and processed either for transfusion or further manufacturing.

(2) "Blood component" means that part of blood separated by physical or mechanical means.

(3) "Drug sample" means a unit of a prescription drug that is not intended to be sold and is intended to promote the sale of the drug.

(4) "Manufacturer" is defined by KRS 315.010(12).

(5) "Prescription drug" is defined by KRS 315.010(21).

(6) "Wholesale drug distribution" means the distribution of legend drugs to persons other than consumers or patients and excludes a common carrier or individual retained solely to transport prescription drugs and the lawful distribution of prescription drug samples by manufacturers or their representatives, but shall not include the sale, purchase, or trade of a legend drug, or offer of same:

(a) By a charitable organization as described in Section 501(c)(3) of the U.S. Internal Revenue Code of 1954 to a nonprofit affiliate of the organization to the extent permitted by law;

(b) By hospitals or other health-care entities under common control;

(d) By a pharmacist dispensing pursuant to a valid prescription order;

(e) By intracompany sales; or

(f) By blood banks.

(7) "Wholesaler" is defined by KRS 315.010(26).

Section 2. Requirements. (1) A wholesaler or distributor shall apply for a permit from the board in accordance with KRS 315.036 and this administrative regulation.

(2) A separate permit shall be required for each facility within the Commonwealth regardless of whether joint ownership or control exists.

(3) An agent or employee of a permit holder shall not be required to obtain a permit under this section when the agent or employee is acting in the usual course of business or employment.

(4) A permit shall not be issued or renewed unless the applicant demonstrates or continues to demonstrate acceptable operational procedures, including:

(a) Adequate maintenance and storage conditions to ensure proper lighting, ventilation, temperature and humidity control, sanitation, space, and security as per label requirements or official United States Pharmacopoeia (USP) compendium requirements. Appropriate manual, electromechanical or electronic temperature and humidity recording equipment, devices, or logs shall be utilized to document proper storage of prescription drugs;

(b) Physical separation and quarantine of deteriorated, damaged, outdated, misbranded, adulterated or otherwise recalled merchandise until they are destroyed or returned;

(c) Providing accurate and precise records of all goods shipped or received including source or recipient, date, quantity, itemized description, and any other information pertinent to the transaction;

(d) Providing proof of registration with the state controlled substance authority, and with the U.S. Drug Enforcement Administration and shall comply with all DEA regulations.

(5) The Kentucky Board of Pharmacy may choose to adopt administrative regulations to include out-of-state distributors or may reciprocally accept in lieu thereof licensure valid by a comparable authority equally recognizing Kentucky's requirements.

Section 3. Qualifications for Permit. (1) The minimum qualifications shall include:

(a) The Kentucky Board of Pharmacy shall consider, at a minimum, the following factors in reviewing the qualifications of persons who engage in wholesale distribution of prescription drugs within the Commonwealth:

1. Any convictions of the applicant under any federal, state, or local laws relating to drug samples, wholesale or retail drug distribution of controlled substances;

2. Any felony convictions of the applicant under federal, state, or local laws;

3. The applicant's past experience in the manufacture or distribution of prescription drugs, including controlled substances;

4. The furnishing by the applicant of false or fraudulent material in any application made in connection with drug manufacturing or distribution;

5. Suspension or revocation by federal, state, or local government of any license or permit currently or previously held by the applicant for the manufacture or distribution of any drugs, including controlled substances;

6. Compliance with the requirements under any previously granted license or permit, if any; and

7. Compliance with requirements to maintain or make available to the Kentucky Board of Pharmacy or to federal, state, or local law enforcement officials those records required under this section.

(b) The Kentucky Board of Pharmacy shall have the right to deny a permit to an applicant if it determines that the granting of that permit would not be in the public interest based on health and safety considerations.

(2) A permit shall not be issued pursuant to this administrative regulation unless the applicant has furnished proof satisfactory to the Board of Pharmacy:

(a) That the applicant is in compliance with all applicable federal and state laws and regulations relating to drugs; and

(b) That the applicant is equipped as to land, buildings, and security to properly carry on the business described in his application.

(3) A permitted manufacturer or wholesaler may sell or distribute federal legend drugs only to the following:

(a) A currently permitted manufacturer;

(b) A currently permitted wholesaler;

(d) A currently licensed practitioner;

(e) A currently licensed hospital, but only for use by or in that hospital;

(f) A person in charge of a laboratory, but only for use in that laboratory for scientific and medical research purposes.

(4) A license issued pursuant to this administrative regulation may be suspended or revoked for failure to comply with the provisions of KRS 315.036 or this administrative regulation.

Section 4. Fees; Renewals. (1) An application for a permit shall be submitted to the Board of Pharmacy on "Application for a License to Operate as a Drug Wholesaler or Manufacturer (KBP W/M 9:92)".

(2) An application shall be accompanied by the annual fee set forth in 201 KAR 2:050.

(3) All permits shall:

(a) Expire on September 30 following date of issuance; and

(b) Be renewable annually thereafter upon proper application accompanied by the renewal fee set forth in 201 KAR 2:050 and shall be nontransferable.

Section 5. Standards. (1) Facilities.

(a) All buildings in which legend drugs are wholesaled, repackaged, stored, held, sold, offered for sale, exposed for sale, or kept for sale shall be of suitable size, construction, and location to facilitate cleaning, maintenance, and proper operations.

(b) Buildings shall meet all applicable federal, state, and local standards. The facility shall have a quarantine area for storage of prescription drugs that are outdated, damaged, deteriorated, misbranded, or adulterated, or that are in immediate or sealed secondary containers that have been opened.

(2) Security.

(a) A wholesale drug distribution center shall be equipped with an alarm system to detect entry after hours.

(b) A wholesale drug distributor shall ensure that access from outside their premises is well-controlled and reduced to a minimum. This includes the installation of adequate lighting at the outside perimeter of the premises.

(c) Internal security policies shall be developed to provide reasonable protection against theft and diversion by limiting access to areas where legend drugs are held to authorized personnel. These policies shall provide protection against tampering with computers or electronic records.

(d) A permit holder shall employ adequate personnel with the education and experience necessary to safely and lawfully engage in the wholesale distribution of prescription drugs.

(e) Lists of officers, directors, managers and other persons in charge of distribution, storage, and handling of prescription drugs, including a description of their duties and summary of their qualifications, shall be maintained for purpose of review.

(3) Recordkeeping.

(a) Inventories and other records of transactions regarding the receipt and disposition of legend drugs shall be maintained and readily available for inspection or photocopying by authorized law enforcement officials for a period of two (2) years following disposition of the drugs. These records shall include:

1. The source of the drugs, including the name and principal address of the seller or transferor, and the address of the location from which the drugs were shipped;

2. The identity and quantity of the drugs received and distributed or disposed of; and

3. The dates of receipt and distribution or other distribution of the drugs.

(b) Records described in this section that are kept at the inspection site or that can be immediately retrieved by computer or other electronic means shall be readily available for authorized inspection during the retention period. Records kept at a central location apart from the inspection site and not electronically retrievable shall be made available for inspection within two (2) working days of a request by an authorized official of a federal, state, or local law enforcement agency.

(4) Written policies and procedures.

(a) Wholesale drug distributors shall establish, maintain, and adhere to written policies and procedures, which shall be followed for the receipt, security, storage, inventory, and distribution of prescription drugs, including policies and procedures for identifying, recording, and reporting losses or thefts and to assure that the wholesale drug distributor prepares for, protects against, and handles crisis situations that affect the security or operation of the facility. Such crises shall include fires, floods, or other natural disasters, and situations of local, state, or national emergency.

(b) There shall be written policies and procedures for managing and correcting all errors or inaccuracies in inventories.

(c) There shall be written policies and procedures to assure that any outdated stock or any stock with an expiration date that, in the wholesale drug distributor's view, does not allow sufficient time for repacking or resale shall be segregated from other stock and shall be prepared for return to the manufacturer or otherwise destroyed, and this shall be documented.

(d) There shall be written policies and procedures by which the wholesaler drug distributor exercises control over the shipping and receiving of all stock within the operation.

(5) Returned, damaged, and outdated prescription drugs. A wholesale operation shall maintain and follow a written procedure to assure the proper handling and disposal of returned goods. When conditions under which a prescription drug has been returned cast doubt on the drug's safety, identity, strength, quality, or purity, then the drug shall be destroyed, or returned to the supplier, unless examination, testing, or other investigation proves that the drug meets appropriate standards of safety, identity, strength, quality, and purity. In determining whether the conditions under which a drug has been returned cast doubt on the drug's safety, identity, strength, quality, or purity, the wholesale drug distributor shall consider, among other things, the conditions under which the drug has been held, stored, or shipped before or during its return and the condition of the drug and its container, carton, or labeling, as a result of storage or shipping.

(6) Handling recalls. A wholesale operation shall maintain and follow written policy for handling recalls and withdrawals of products. The policy shall cover all recalls and withdrawals of drug products due to:

(a) Any voluntary action on the part of the manufacturer;

(b) The direction of the Food and Drug Administration, or any other federal, state, or local government agency; and

(7)(a) A visual examination of all materials received or shipped shall be made to guarantee product identity and to reasonably guard against acceptance or delivery of damaged, contaminated, tampered, or otherwise unfit stock.

(b) Procedures for distribution of approved stock shall provide for a rotation whereby the oldest inventory is distributed first.

(c) A wholesale drug distributor shall be subject to the provisions of any applicable federal, state, or local laws or regulations that relate to prescription drug product salvaging or reprocessing, including Chapter 21, Parts 207, 210, and 211 of the Code of Federal Regulations.

Section 6. Pharmacist-in-charge. A manufacturer shall designate a pharmacist-in-charge of the facility who shall be responsible to the board for security and recordkeeping. The pharmacist-in-charge shall review the security and records by conducting an on-site inspection not less than quarterly and recording the results of those inspections in the policy and procedure manual.

Section 7. Violations. (1) A drug manufacturer or wholesaler shall not distribute legend drugs directly to a consumer or a patient or operate in a manner that endangers the public health.

(2) Violation of any of these provisions shall be grounds for the suspension or revocation of the license.

Section 9. Incorporation by Reference. (1) "Application for a License to Operate as a Drug Wholesaler or Manufacturer" (KBP W/M 9:92) is incorporated by reference.

(2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Kentucky Board of Pharmacy, 23 Millcreek Park, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m. (9 Ky.R. 77; eff. 8-11-82; Am. 11 Ky.R. 1616; eff. 6-4-85; 16 Ky.R. 1597; eff. 4-12-90; 18 Ky.R. 2348; 2832; 2917; eff. 3-25-92; 19 Ky.R. 445; eff. 10-8-92; 28 Ky.R. 2406; 29 Ky.R. 98; eff. 7-15-2002.)