Applicant registration for wholesalers or manufacturers of prescription drugs

Summary of provisions

Section one amends subparagraph 2 of paragraph a of subdivision 4 of section 6808 of the education law, as amended by chapter 62 of the laws of 1989, by increasing the application fee that shall accompany the registration for a wholesaler or manufacturer to one thousand two hundred dollars from the current eight hundred twenty-five dollars.

Section two amends paragraphs b and d of subdivision 4 of section 6808 of the education law, paragraph b as amended by chapter 538 of the laws of 2001 and paragraph d as amended by chapter 62 of the laws of 1989. Paragraph b is amended by providing that the triennial registration fee that is paid by wholesalers and manufacturers shall be increased to eight hundred dollars, from five hundred twenty dollars, or a pro rated portion as determined by the department of education. Paragraph d provides that in the event that the location of a business changes, the fee for inspection and endorsement shall be increased to three hundred dollars from the current one hundred seventy dollars.

Section three amends subdivision 4 of section 6808 of the education law by adding six new paragraphs e, f, g, h, i and j. Paragraph e provides that any applicant for registration as a wholesaler or manufacturer shall be of good moral character, as determined by the department of education. The department shall require a criminal history records search for officers, directors and owners of such wholesaler or manufacturer. Paragraph f provides that upon receipt of an application for registration, the commissioner shall initiate a criminal history records search of the persons identified in paragraph e. Prior to conducting the criminal history records search and fingerprinting process, the commissioner shall obtain the applicant's consent to the criminal history records search. Paragraph f further sets forth the process and procedures to be followed by the commissioner and the division of criminal justice services in conducting the criminal history records search. "Criminal history record" is defined. All such criminal history records shall be confidential pursuant to applicable federal and state laws, rules and regulations, and shall not be published or disclosed to persons other than the commissioner unless otherwise authorized by law.

Any person who willfully permits the release of any confidential criminal history information to persons not permitted to receive such information shall be guilty of a misdemeanor.

Paragraph g provides additional duties of the commissioner and the department, including promulgating rules and regulations to require the performance of a criminal history records check of the individuals identified in paragraph e, and a form to be provided to all applicants for registration. Specifics of such form are outlined. Paragraph h provides that every wholesaler shall submit a performance or surety

bond of not less than one hundred thousand dollars to the department to ensure compliance with the provisions of this article. The department may waive such bond for certain not-for-profit entities or certain other wholesalers. Paragraph i provides that the department may promulgate rules and regulations to exempt from the requirements of paragraphs e, E, g and h a wholesaler that has received accreditation from a nationally recognized accreditation body approved by the commissioner and that meets the licensing standards under this subdivision. Paragraph j provides that the commissioner shall exempt certain manufacturers from the requirements of paragraphs e, f, g and h in the event that such requirements are not required by federal law or regulation, unless the commissioner determines that such requirements are necessary to prevent a risk to prescription drug distribution in the state.

Section four provides the effective date.

Justification

The marketing of counterfeit drugs has become prevalent throughout the United States as well as around the world. The World Health Organization (WHO) estimates that counterfeit drugs make up 10% of all drugs sold worldwide, With the percentage much higher in developing countries. January 2009 Report by the American Council on Science and Health, "Counterfeit Drugs: Coming to a Pharmacy Near You with an Update for 20091 (ACSH 2009 Report). According to the National Association of Boards of Pharmacy (NAP), counterfeit drug sales accounted for $75 billion in global sales in 2010, with an estimated 1 to 2 percent of drugs in North America being counterfeit. Moreover, counterfeit drugs have contributed to the increasing drug resistance of the most deadly infectious diseases such as HIV/AIDS, tuberculosis and malaria.

Despite the view that the U.S. drug supply is among the most secure in the world, the growing size and sophistication of counterfeit, drug rings have allowed them to penetrate the legitimate drug supplies of the United States. In the last five years, counterfeit drug investigations by the Office of Criminal Investigations of the Food and Drug Administration (FDA) increased almost ten-fold, from 6 in 2000 to 59 in 2004.

If we accept the NABP's estimate that 1-2% of drugs sold in North America are counterfeit (compared to a WHO estimate of 5% to 7% in the United States), the odds are, conservatively, 1 in 100 that the drug a consumer receives at a pharmacy in the U.S. is counterfeit and that out of the approximately 3.7 billion prescriptions filled in the U.S. this year, as many as 37 million may have been filled with counterfeit versions. There is, however, no way to know the true degree to which counterfeit drugs have contaminated our drug supply. Most of the incidents go undetected since the evidence is usually destroyed when the drug is consumed and the results of taking the counterfeit drug are blamed on other causes, such as incorrect diagnosis, or in the case of HIV/AIDS further complications and death are expected. Recently, two highly publicized examples of counterfeit drugs come to mind: Lipitor tablets used to lower cholesterol, where in 2005 in New York State alone, New Yorkers received an estimated 100,000 dosage units of counterfeit Lipitor; and Procrit, an injectable drug used to stimulate red blood cell growth to treat severe anemia and anemia related to treatment for HIV/AIDS. There have been cases of

counterfeits of other well-known brands as well as drugs used to. treat critically-ill patients in the U.S. in the last few years to hundreds of thousands of unwitting patients, including:

*Combivir, used to prolong the life of HIV/AIDS patients by preventing the virus from reproducing--replaced with another HIV medication that can cause fatal allergic reactions

*Serostim, a human growth hormone used to prevent HIV/AIDS patients from wasting-replaced with dangerous levels of a fertility drug

*Celebrex, used to treat arthritis--replaced with vitamins

*Viagra, used to treat impotence--over 700,000 counterfeit pills were manufactured

*Zyprexa, used to help prevent hallucinations and delusions in schizophrenic and bipolar patients-replaced with aspirin

*Neupogen, an injectable used to boost the immune system of cancer patients-replaced with saline

ACSH 2009 Report. In addition; there have been multiple incidents involving counterfeit versions of Tamiflu, used to treat seasonal or avian flu. Aside from the obvious direct result of receiving the counterfeit medicine, treatment from counterfeit versions may also increase the risk of causing the virus to develop a resistance to the Tamiflu drug.

The nature of the drug supply system in the U.S. makes our drugs ripe for diversion and counterfeiting. The path of a drug from manufacturer to distributor to pharmacy more often than not is not a single or linear one; in fact, a substantial portion of our drugs flow through a complex network of distributors, intermediaries and secondary wholesalers.

Recognizing the need to assure the safe and effective distribution of prescription drugs, Congress enacted more than 20 years ago the Prescription Drug Manufacturing Act (PDMA) which, among other things, imposed a requirement on wholesale distributors to maintain either a paper or electronic pedigree of prescription drugs. Pending development of appropriate technology to facilitate the establishment of an electronic pedigree for prescription drugs, and thereby allow us to track and trade prescription drugs through the supply chain, the FDA has stated that all levels of government, in addition to the private sector, should take responsibility for ensuring the safety and security of the U.S. drug distribution system. Counterfeit Drug Task Eeport February 2004 Update, 2009. At the State level, the Update noted that it would be beneficial for states to strengthen their provisions governing wholesale distribution. The Update further reported that the FDA planned to pursue increased criminal penalties for counterfeiting in the United States Sentencing Commissions sentencing guidelines. To date, thirty six states have strengthened licensure requirements of wholesalers through legislation and/or regulations.

To better secure the drug supply system pending implementation of federal law, we must adopt at the state level a multi-layered strategy that includes strengthening the licensing requirements of wholesalers so that our regulatory agencies have the authority to carry out the law. Ensuring that all persons and entities involved in the wholesale distribution of drug products meet stringent licensing criteria and maintain high ethical and business standards is critical.

This bill toughens the licensing requirements of manufacturers and wholesalers by, among other things, carrying out criminal background checks of responsible individuals and requiring significant surety bonds, decreasing the likelihood that corrupt, "fly-by-night" operations will be able to infiltrate the supply chain and adulterate or taint the prescription drugs.

Without enacting legislation at the state level to address the weaknesses inherent in our drug supply system, we will continue to leave the Public vulnerable to individuals who are willing to harm, and even kill, people for profit.

Legislative history

2014: 5.4144 Referred to Higher Education / A.5925 Referred to Higher Education Similar to A.2460-A, 2011 referred to higher education and 2012 referred to Codes. Same as S.5286-A, 2011 and 2012, referred to higher education. Similar to A.6546-A, 2009 and 2010 referred to higher education. Similar to A.7810-C, 2007 and 2008 referred to higher education. Same as S.5290-C, 2007 and 2008 referred to health. Similar to A.2957-B, 2005 and 2006 referred to higher education. Same as S.3278-A, 2005 passed senate and 2006 referred to higher education.

Fiscal implications

None to the state.

Effective date

This act shall take effect on the one hundred and eightieth day after it shall have become law.