By: Truitt H.B. No. 3174
A BILL TO BE ENTITLED
AN ACT
relating to the licensing and regulation of wholesale drug
distributors; providing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 431.201, Health and Safety Code, is
amended to read as follows:
Sec. 431.201. DEFINITIONS. In this subchapter:
(1) "Authentication" means to affirmatively verify
before any distribution of a prescription drug occurs that each
transaction listed on the pedigree for the drug has occurred.
(2) "Chain pharmacy warehouse" means a location that
serves as a central warehouse for drugs or devices and from which
intracompany sales or transfers of drugs or devices are made to a
group of pharmacies under common ownership and control.
(3) "Normal distribution chain" means a chain of
custody for a drug from a manufacturer to a wholesale distributor to
a pharmacy to a patient.
(4) "Pedigree" means a document or electronic file
containing information that records each distribution of a
prescription drug, from sale by a manufacturer, through acquisition
and sale by any wholesale distributor or repackager, until final
sale to a pharmacy or other person dispensing or administering the
prescription drug.
(5) "Place of business" means each location at which a
drug for wholesale distribution is located.
(6) "Prescription drug" has the meaning assigned by
Section 551.003, Occupations Code.
(7) "Repackage" means repackaging or otherwise
changing the container, wrapper, or labeling of a drug to further
the distribution of a prescription drug. The term does not include
repackaging by a pharmacist to dispense a drug to a patient.
(8) "Repackager" means a person who engages in
repackaging.
(9) "Wholesale distribution" means distribution to a
person other than a consumer or patient, and includes distribution
by a manufacturer, repackager [repacker], own label distributor,
private-label distributor, broker, jobber, warehouse, independent
wholesale drug traders, retail pharmacy that conducts wholesale
distribution, or wholesaler. The term does not include:
(A) intracompany sales of prescription drugs,
which means transactions or transfers of prescription drugs between
a division, subsidiary, parent, or affiliated or related company
that is under common ownership and control of a corporate entity;
(B) the sale, purchase, distribution, trade, or
transfer of prescription drugs or the offer to sell, purchase,
distribute, trade, or transfer a prescription drug for emergency
medical reasons;
(C) the distribution of prescription drug
samples by a representative of a manufacturer;
(D) the return of drugs by a hospital, health
care entity, retail pharmacy, or charitable institution in
accordance with 21 C.F.R. 203.23;
(E) the sale of minimal quantities of
prescription drugs by retail pharmacies to licensed practitioners
for office use; or
(F) the delivery by a retail pharmacy of a
prescription drug to a patient or a patient's agent under the lawful
order of a licensed practitioner.
(10) "Wholesale distributor" means a person licensed
under this chapter to engage in the wholesale distribution of
prescription drugs.
[(2) "Place of business" means each location at which
a drug for wholesale distribution is located.]
SECTION 2. Sections 431.202 and 431.203, Health and Safety
Code, are amended to read as follows:
Sec. 431.202. LICENSE [STATEMENT] REQUIRED. (a) A person
may not engage in wholesale distribution of drugs in this state
unless the person holds a wholesale drug distribution license under
this subchapter for each place of business [has filed with the
commissioner a signed and verified license statement on a form
furnished by the commissioner].
(a-1) A person may not engage in the wholesale distribution
of drugs as a chain pharmacy warehouse location unless the person
holds a chain pharmacy license under this chapter.
(b) A [The] license issued under this subchapter expires on
the first anniversary of the date of issuance [statement must be
filed annually].
Sec. 431.203. [CONTENTS OF] LICENSE APPLICATION
[STATEMENT]. (a) An applicant for a license under this subchapter
must submit an application to the department on the form prescribed
by the department. The application [license statement] must
contain:
(1) all trade or business names [the name] under which
the business is conducted;
(2) the address and telephone number of each place of
business that is licensed;
(3) the type of business and the name and residence
address of:
(A) the proprietor, if the business is a
proprietorship;
(B) all partners, if the business is a
partnership; or
(C) all principals, if the business is an
association;
(4) the date and place of incorporation, if the
business is a corporation;
(5) the names and residence addresses of the
individuals in an administrative capacity showing:
(A) the managing proprietor, if the business is a
proprietorship;
(B) the managing partner, if the business is a
partnership;
(C) the officers and directors, if the business
is a corporation; or
(D) the persons in a managerial capacity, if the
business is an association; [and]
(6) the name, telephone number, and residence address
of a designated representative [an individual in charge] of each
place of business;
(7) the state of incorporation, if the business is a
corporation;
(8) a list of all licenses and permits issued to the
applicant by any other state under which the applicant is permitted
to purchase or possess prescription drugs; and
(9) the name of:
(A) the manager for each place of business; and
(B) all affiliated parties for the business.
(b) Each person listed in Subsections (a)(6) and (a)(9)
shall provide the following to the department:
(1) the person's places of residence for the past seven
years;
(2) the person's date and place of birth;
(3) the person's occupations, positions of employment,
and offices held during the past seven years;
(4) the business name and address of any business,
corporation, or other organization in which the person held an
office under Subdivision (3) or in which the person conducted an
occupation or held a position of employment;
(5) a statement of whether during the preceding seven
years the person was the subject of a proceeding to revoke a license
and the nature and disposition of the proceeding;
(6) a statement of whether during the preceding seven
years the person has been enjoined, either temporarily or
permanently, by a court from violating any federal or state law
regulating the possession, control, or distribution of
prescription drugs, including the details concerning the event;
(7) a written description of any involvement by the
person with any business, including any investments, other than the
ownership of stock in a publicly traded company or mutual fund
during the past seven years, that manufactured, administered,
prescribed, distributed, or stored pharmaceutical products and any
lawsuits in which the businesses were named as a party;
(8) a description of any felony offense for which the
person, as an adult, was found guilty, regardless of whether
adjudication of guilt was withheld or whether the person pled
guilty or nolo contendere;
(9) a description of any criminal conviction of the
person under appeal, a copy of the notice of appeal for that
criminal offense, and a copy of the final written order of an appeal
not later than the 15th day after the date of the appeal's
disposition; and
(10) a photograph of the person taken not earlier than
30 days before the date the application was submitted.
(c) The information submitted under Subsection (b) must be
attested to under oath.
(d) An applicant or license holder shall file with the board
a written notice of any change in the information required under
this section.
SECTION 3. Subchapter I, Chapter 431, Health and Safety
Code, is amended by adding Section 431.2030 to read as follows:
Sec. 431.2030. QUALIFICATIONS FOR LICENSE. (a) To qualify
for the issuance or renewal of a wholesale distributor license
under this subchapter, the designated representative of an
applicant or license holder must:
(1) be at least 21 years of age;
(2) have been employed full-time for at least three
years by a pharmacy or a wholesale distributor in a capacity related
to the dispensing and distributing of prescription drugs, including
recordkeeping for the dispensing and distributing of prescription
drugs;
(3) be employed by the applicant full-time in a
managerial-level position;
(4) be actively involved in and aware of the actual
daily operation of the wholesale distributor;
(5) be physically present at the applicant's place of
business during regular business hours, except when the absence of
the designated representative is authorized, including sick leave
and vacation leave;
(6) serve as a designated representative for only one
applicant at any one time;
(7) not have been convicted of a violation of any
federal, state, or local laws relating to wholesale or retail
prescription drug distribution or the distribution of controlled
substances; and
(8) not have been convicted of a felony under federal,
state, or local laws.
(b) The department or a nationally recognized accreditation
program selected by the department may assess and collect an
inspection fee to cover the costs of determining whether an
applicant is qualified for a license under this subchapter,
including costs to conduct physical inspections, business and
criminal background checks, activities related to bonding
requirements, and any other necessary activity.
SECTION 4. Subchapter I, Chapter 431, Health and Safety
Code, is amended by adding Sections 431.2035 and 431.2036 to read as
follows:
Sec. 431.2035. CRIMINAL HISTORY RECORD INFORMATION. The
department shall submit to the Department of Public Safety the
fingerprints provided by a person with an initial or a renewal
license application to obtain the person's criminal history record
information and may forward the fingerprints to the Federal Bureau
of Investigation for a federal criminal history check.
Sec. 431.2036. BOND. (a) A wholesale distributor applying
for or renewing a license shall submit payable to this state a bond
or other equivalent security acceptable to the department in the
amount of $100,000, including an irrevocable letter of credit or a
deposit in a trust account or financial institution, payable to
this state.
(b) The bond submitted under Subsection (a) shall secure
payment of any fines or penalties imposed by the department and any
fees and costs incurred by this state related to that license
holder, that are authorized under the laws of this state and that
the license holder fails to pay before the 30th day after the date a
fine, penalty, or cost is assessed.
(c) The department or this state may make a claim against a
bond or security submitted under Subsection (a) before the first
anniversary of the date a license expires or is revoked under this
chapter.
(d) The department shall deposit the bonds received under
this section in a separate account.
SECTION 5. Section 431.204(c), Health and Safety Code, is
amended to read as follows:
(c) The executive commissioner of the Health and Human
Services Commission [board] by rule shall set the fees in amounts
that are reasonable and necessary and allow the department to
recover [at least 50 percent of] the annual expenditures of state
funds by the department in:
(1) reviewing and acting on a license;
(2) amending and renewing a license;
(3) inspecting a licensed facility; and
(4) implementing and enforcing this subchapter,
including a rule or order adopted or a license issued under this
subchapter.
SECTION 6. Subchapter I, Chapter 431, Health and Safety
Code, is amended by adding Sections 431.2065-431.2067 to read as
follows:
Sec. 431.2065. MINIMUM RESTRICTIONS ON TRANSACTIONS. (a)
Except as otherwise provided by this subsection, a wholesale
distributor may not purchase or otherwise receive a prescription
drug from a pharmacy. A wholesale distributor may receive a
prescription drug from a pharmacy if the prescription drug was
originally purchased by the pharmacy from the wholesale
distributor.
(b) A wholesale distributor who receives a prescription
drug from a pharmacy may not:
(1) receive an amount or quantity of a prescription
drug greater than the amount or quantity originally sold by the
wholesale distributor to the pharmacy; or
(2) pay the pharmacy an amount, either in cash or
credit, that exceeds the amount the pharmacy originally paid the
wholesale distributor for the prescription drug.
(c) A manufacturer or wholesale distributor may distribute
prescription drugs only to a person licensed by the appropriate
state licensing authorities. Before furnishing prescription drugs
to a person not known to the manufacturer or wholesale distributor,
the manufacturer or wholesale distributor must verify that the
person is legally authorized to receive the prescription drugs by
contacting the appropriate state licensing authority.
(d) Except as otherwise provided by this subsection,
prescription drugs distributed by a manufacturer or wholesale
distributor may be delivered only to the premises listed on the
license. A manufacturer or wholesale distributor may distribute
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) delivery is made only to meet the immediate needs
of a particular patient of the authorized person.
(e) Prescription drugs may be distributed to a hospital
pharmacy receiving area if a pharmacist or an authorized receiving
person signs, at the time of delivery, a receipt showing the type
and quantity of the prescription drug received. Any discrepancy
between the receipt and the type and quantity of the prescription
drug actually received shall be reported to the delivering
manufacturer or wholesale distributor not later than the next
business day after the date of delivery to the pharmacy receiving
area.
(f) A manufacturer or wholesale distributor may not accept
payment for, or allow the use of, a person's credit to establish an
account to purchase prescription drugs from any person other than
the owner of record, the chief executive officer, or the chief
financial officer listed on the license of a person legally
authorized to receive prescription drugs. An account established
to purchase prescription drugs must bear the name of the license
holder.
Sec. 431.2066. The Texas Health and Human Services
Commission shall:
(1) conduct a study on the implementation of
electronic pedigrees;
(2) in conducting the study under Subdivision (1),
consult with manufacturers, distributors, and pharmacies
responsible for the sale and distribution of prescription drugs in
this state; and
(3) based on the results of the study, establish an
implementation date, which may not be earlier than December 31,
2007, for electronic pedigrees.
SECTION 7. Subchapter I, Chapter 431, Health and Safety
Code, is amended by adding Sections 431.2075-431.2077 to read as
follows:
Sec. 431.2075. ORDER TO CEASE DISTRIBUTION. (a) The
commissioner of state health services shall issue an order
requiring a person, including a manufacturer, distributor, or
retailer of a prescription drug, to immediately cease distribution
of the drug if the commissioner determines there is a reasonable
probability that:
(1) a wholesale distributor has:
(A) knowingly violated this subchapter;
(B) knowingly sold, distributed, transferred,
manufactured, repackaged, handled, or held a counterfeit
prescription drug intended for human use;
(2) the prescription drug could cause serious adverse
health consequences or death; and
(3) other procedures would result in unreasonable
delay.
(b) An order under Subsection (a) must provide the person
subject to the order with an opportunity for an informal hearing on
the actions required by the order to be held not later than the 10th
day after the date of issuance of the order.
(c) If, after providing an opportunity for a hearing, the
commissioner of state health services determines that inadequate
grounds exist to support the actions required by the order, the
commissioner shall vacate the order.
Sec. 431.2076. PROHIBITED ACTS. (a) A person violates this
subchapter if the person performs, causes the performance of, or
aids and abets the performance of an act listed in Subsection (b).
(b) A person violates this subchapter if the person:
(1) operates as a wholesale drug distributor under
this subchapter without a license;
(2) sells, distributes, or transfers a prescription
drug to a person who is not authorized under state or federal law to
receive the prescription drug in violation of Section 431.2065(c);
(4) fails to deliver prescription drugs to specified
premises as required by Section 431.2065(d);
(5) accepts payment or credit for the sale of
prescription drugs in violation of Section 431.2065(f);
(6) provides this state or any representative of this
state or any federal official with false or fraudulent records or
makes false or fraudulent statements regarding any matter related
to this subchapter;
(7) obtains or attempts to obtain a prescription drug
by fraud, deceit, or misrepresentation or engages in
misrepresentation or fraud in the distribution of a prescription
drug;
(9) manufactures, repackages, sells, transfers,
delivers, holds, or offers for sale any prescription drug that is
adulterated, misbranded, counterfeit, suspected of being
counterfeit, or has otherwise been rendered unfit for distribution;
(l0) adulterates, misbrands, or counterfeits any
prescription drug;
(11) receives any prescription drug that is
adulterated, misbranded, stolen, obtained by fraud or deceit,
counterfeit, or suspected of being counterfeit and delivers or
proffers delivery of the drug for pay or otherwise; or
(12) alters, mutilates, destroys, obliterates, or
removes all or any part of the label from a prescription drug or
commits any other act related to a prescription drug that results in
the prescription drug being misbranded.
Sec. 431.2077. CRIMINAL PENALTIES. (a) A person commits an
offense if the person engages in the wholesale distribution of
prescription drugs in violation of this subchapter. An offense
under this subsection is punishable by imprisonment for not more
than 15 years, a fine not to exceed $50,000, or both imprisonment
and a fine.
(b) A person commits an offense if the person knowingly
engages in the wholesale distribution of prescription drugs in
violation of this subchapter. An offense under this subsection is
punishable by imprisonment, a fine not to exceed $500,000, or both
imprisonment and a fine.
SECTION 8. Section 411.110, Government Code, is amended to
read as follows:
Sec. 411.110. ACCESS TO CRIMINAL HISTORY RECORD
INFORMATION: [TEXAS] DEPARTMENT OF STATE HEALTH SERVICES. (a) The
[Texas] Department of State Health Services is entitled to obtain
from the department criminal history record information maintained
by the department that relates to:
(1) a person who is:
(A) [(1)] an applicant for a license or
certificate under the Emergency Medical Services Act (Chapter 773,
Health and Safety Code);
(B) [(2)] an owner or manager of an applicant for
an emergency medical services provider license under that Act; or
(C) [(3)] the holder of a license or certificate
under that Act; or
(2) an applicant for a license or a license holder
under Subchapter I, Chapter 431, Health and Safety Code.
(b) Criminal history record information obtained by the
[Texas] Department of State Health Services under Subsection (a)
may not be released or disclosed to any person except on court
order, with the written consent of the person or entity that is the
subject of the criminal history record information, or as provided
by Subsection (e).
(c) After an entity is licensed or certified, the [Texas]
Department of State Health Services shall destroy the criminal
history record information that relates to that entity.
(d) The Department of State Health Services [Texas Board of
Health] shall destroy criminal history record information that
relates to an applicant that is not certified.
(e) The Department of State Health Services [Texas Board of
Health] is not prohibited from disclosing criminal history record
information obtained under Subsection (a) in a criminal proceeding
or in a hearing conducted by the [Texas] Department of State Health
Services.
SECTION 9. (a) The executive commissioner of the Health and
Human Services Commission shall adopt the rules necessary to
implement the changes in law made by this Act to Subchapter I,
Chapter 431, Health and Safety Code, not later than January 1, 2006.
(b) A wholesale drug manufacturer is not required to comply
with and is not subject to penalties for a violation of Subchapter
I, Chapter 431, Health and Safety Code, as amended by this Act,
before March 1, 2006.
SECTION 10. The change in law made by this Act applies only
to an offense committed on or after the effective date of this Act.
An offense committed before the effective date of this Act is
covered by the law in effect when the offense was committed, and the
former law is continued in effect for that purpose. For purposes of
this section, an offense was committed before the effective date of
this Act if any element of the offense was committed before that
date.
SECTION 11. This Act takes effect September 1, 2005, except
that Section 431.2077, Health and Safety Code, as added by this Act,
takes effect March 1, 2006.