The 2016 Florida Legislature enacted substantial legislation (Ch. 2016-212, Laws of Florida) to bring Florida’s Drug and Cosmetic Act (Ch. 499, Florida Statutes) in line with the federal Drug Supply Chain and Security Act (“DSCSA”). Since the DSCSA preempts state law, the changes were necessary to avoid confusion between the state and federal exemptions to the term “wholesale distribution”. The legislation conforms Florida Statutes to federal law, and therefore clarifies that several categories of drug distribution are allowed in Florida, even though Florida Statutory language previously did not list them. This blog briefly will address a few of these changes.

  1. Intracompany Distribution

Among the new exemptions is one for “[i]ntracompany distribution of any drug between members of an affiliate or within a manufacturer.” Section 499.003(48)(c), FS. This would allow, for example, a chain pharmacy to transfer drugs from one pharmacy to another. The Department of Business and Professional Regulation (“DBPR”) previously clarified that this federal exemption allowed such distributions among a chain pharmacy in Florida when it issued a declaratory statement to Publix Super Markets, Inc. in 2014 (“In Re: Petition for Declaratory Statement, Publix Super Markets, Inc., Petitioner” DS 2014-007).

Prescription drug plans and PBMs audit pharmacies to make sure that the payments made to the pharmacies are justified. Pharmacy auditors frequently rely on a drug inventory analysis to determine overpayments by comparing drug purchases from drug wholesalers to drugs dispensed by the pharmacy. With the federal exemption in place since November 27, 2013, the auditors should have already been considering these intracompany distributions.   However, the new state law provides an even stronger argument that the auditors will need to consider drugs obtained through this exemption in conducting such audits. We may also see guidance from these payors regarding  the types of records the auditors expect should  be kept to appropriately document such exempt intracompany transfers.

Hospitals may question whether they can also utilize the “Intracompany Distribution” exemption in lieu of obtaining a restricted drug distributor-health care entity permit. This permit, allowed as a partial exemption to the definition of “wholesale distribution,” allows hospitals to transfer drugs from the entity holding this permit to entities under common control. The statute itself does not state which exemption controls, though there is a strong legal argument that  the application of the intracompany transfer exemption applies for most health care systems under common ownership.

  1. Distribution to Practitioners for Office Use

Another exemption that will benefit both pharmacies and practitioners is for:

The distribution of minimal quantities of prescription drugs by a licensed retail pharmacy to a licensed practitioner for office use in compliance with chapter 465 and rules adopted thereunder. The department shall adopt rules specifying the quantities of prescription drugs which are considered to be minimal quantities. However, until such rules are adopted, minimal quantities distributed may not exceed 3 percent of the retail pharmacy’s total annual purchases of prescription drugs.  Section 499.003(48)(m), FS.

This exemption will allow retail (community) pharmacies to sell limited amounts of drugs for “office use” to “practitioners.” For instance, if a pharmacy has annual drug purchases of $1 million, it can distribute $30,000 worth of drugs to practitioners for office use only. Florida already allows pharmacies to provide compounded drugs for office use, and it is not known whether the intent of this legislation is to be a further basis for office use compounding or whether the statute is intended to apply only to manufactured drug products. This may be clarified when the Board of Pharmacy adopts rules on this exemption. Pharmacies utilizing this exemption will have to differentiate between drugs that are for “office use” and those intended for dispensing by the practitioner.

Community pharmacies may currently obtain a permit from the DBPR Division of Drugs, Devices and Cosmetics which allows these pharmacies to distribute up to 30% of their annual drug purchases to another community pharmacy, a modified class II institutional pharmacy, or a health care practitioner (the “retail pharmacy wholesaler permit”). This permit allows the distribution of drugs regardless of whether they are for office use or will be used for further dispensing,  and it allows for substantially more sales.

  1. Emergency Medical Drug Shortage

Unfortunately, the legislation limits the frequently used exemption for distributions between retail pharmacies for “emergency medical reasons.” It now states that the exemption “may include” transfers between such pharmacies to alleviate a temporary shortages.  However, it goes on to state that “a drug shortage not caused by a public health emergency does not constitute an emergency medical reason.” Public health emergencies are few and far between, so this exemption probably will have little use going forward.

  1. Other Exemptions and Changes

The legislation also provides new exemptions for repackagers, common carriers, medical convenience kits, and certain IV solutions, among others. The IV solution exemption may help hospitals and health care systems better manage the distribution of these drugs without having to use a restricted drug distributor’s permit. However, the legislation does not address the question of where the IV drugs may be stored on the hospital campus.

Other major changes include the repeal of Florida’s drug pedigree program in favor of the federal drug track and trace program in the DSCSA, allowing a permit for virtual drug manufacturers and non-resident drug repackagers. The law becomes effective July 1, 2016.

Key Takeaways:

  • Chain pharmacies may use the intracompany distribution exemption for moving drugs between their pharmacies
  • The intracompany distribution exemption has been adopted in Florida, but we don’t yet know how DBPR will apply it to hospitals that historically obtained the restricted drug distributor permit-health care entity
  • Community pharmacies may distribute up to 3% of annual purchases to practitioners for office use (which amount could be changed by Board of Pharmacy rule)
  • The emergency shortage exemption may now only be used if the shortage was caused by a public health emergency (think Zika virus per Executive Order 16-29)
  • Certain IV solutions may now be distributed without a permit
  • Florida’s drug pedigree program is being supplanted by the Federal track and trace program