Whoever authored this new legislation (Chapter 2021-135, Laws of Florida) deserves a pat on the back for an idea whose time has come. When an applicant files for a change of ownership (“CHOW”) or change of location for one of the permits authorized by the Florida Department of Business Professional Regulation, Division of Drugs, Devices, and Cosmetics (affectionately, “DDC”) under Part 1 of Chapter 499, FS, they can now also request a temporary permit for 90 days.
Having the option to request a temporary permit is especially important with a CHOW. In a normal health care CHOW process, the parties are hammering out the terms of the agreement while the health care due diligence team coordinates with state agency personnel to have them issue the health care entity permit exactly on the date that the parties wish to close. The problem is that the buyer’s and seller’s schedules may not completely coincide with statutory time frames and the schedules of the state agency permit processors. So, if the buyer and seller want to close in 10 days, but the state can’t process the application for 30 days, then if the parties close the deal there will be no permit for 20 days. The new owner loses business and the provider’s patients struggle to find a provider to serve them while the buyer awaits the new permit. Also, if there are drugs on the premises, what happens to them when the permit is no longer in effect?
The transaction/regulatory legal community has developed all kinds of legal machinations and fictions to tie them over while they wait for the health care permit to issue. These might include “bridge” or management agreements or powers of attorney where the buyer takes over running the business while the parties await permit issuance. During this period, the seller remains on the hook for liability that may occur while the buyer operates the business under the seller’s permit. And, while the parties can address civil liability through contractual indemnity by the buyer, there is really nothing to protect the seller against regulatory violations by the buyer while the buyer operates the seller’s health care business.
Enter our hero, the new DDC temporary operating permit. Under the new temporary permit, the buyer can apply for and receive its own temporary permit for 90 days pending receipt of the actual permit. The temporary permit will allow the buyer to step in early and operate the seller’s business while DDC works on issuing the actual permit. The only big downside is that once the temporary permit issues, the seller’s permit is immediately null and void. Thus, sellers should only allow buyers to apply for a temporary permit when they are really, really, really positively sure that the deal will go through. If the deal doesn’t go through, the temporary permit expires in 90 days and the seller is left with a business it can’t operate and no money from the buyer, though an astute seller will require some money before allowing the buyer to file for a temporary permit. You should note that when they say 90 days, they really mean 90 days – the temporary permit becomes null and void on the 91st day and it cannot be extended. If the temporary permit expired or was about to expire and the CHOW application had not been approved, the seller could quickly file a new license application (or maybe file one upon issuance of the temporary permit just in case and withdraw the application if not needed) and hope it can be processed quickly and perhaps before the 91st day.
The permit will also help with change of location when a licensee moves. Because the DDC permits are facility permits, the new facility generally has to be inspected before the new permit can issue. As with CHOWs, timing the move for a change in location with the DDC’s permit processing and inspections can be tricky. Once again, the temporary permit steps in to make things easier for the moving health care provider by perhaps allowing it to operate sooner under the temporary permit.
This is the list of DDC permits eligible:
- A prescription drug manufacturer;
- A prescription drug repackager;
- A nonresident prescription drug manufacturer;
- A nonresident prescription drug repackager;
- A prescription drug wholesale distributor;
- An out-of-state prescription drug wholesale distributor;
- A retail pharmacy drug wholesale distributor;
- A restricted prescription drug distributor;
- A complimentary drug distributor;
- A freight forwarder;
- A veterinary prescription drug retail establishment;
- A veterinary prescription drug wholesale distributor;
- A limited prescription drug veterinary wholesale distributor;
- An over-the-counter drug manufacturer;
- A device manufacturer;
- A cosmetic manufacturer;
- A third party logistics provider; or
- A health care clinic establishment.
While you may think that these permits are all drug and drug distribution permits only important to Florida’s pharmacy law geeks, the last permit on the list, the health care clinic establishment permit (or “HCCE”), is actually very common among a variety of health care providers including physician practices, clinics, urgent care centers, veterinary clinics, hospital owned providers, and others. The HCCE permit allows business entities to purchase and hold drugs in their own names.
Unfortunately, another common DDC permit, medical oxygen retailer, is not on the list. When the legislature separated the medical gas section of Chapter 499, FS, a few years ago, medical oxygen permits were put in a separate part of the statute to prevent medical oxygen from being treated like a regular prescription drug. Health care entities that provide durable medical equipment also often provide medical oxygen so the temporary permit will not help with sales of these kinds of businesses. Overall, however, the provision of temporary permits provides a continuity of operations and care that was much needed in Florida’s health care community.