Legislature(2017 - 2018)ADAMS ROOM 519
04/12/2018 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB158 | |
| SB37 | |
| SB15 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 37 | TELECONFERENCED | |
| + | SB 15 | TELECONFERENCED | |
| + | SB 155 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 158 | TELECONFERENCED | |
CS FOR SENATE BILL NO. 37(FIN)
"An Act relating to the Board of Pharmacy; relating to
the licensing of certain entities and inspection of
certain facilities located outside the state; relating
to drug supply chain security; creating a position of
executive administrator for the Board of Pharmacy; and
providing for an effective date."
1:52:08 PM
JANE CONWAY, STAFF SENATOR CATHY GIESSEL, SPONSOR, relayed
that SB 37 brought Alaska into compliance with the Drug
Quality Security Act (DQSA), which created a new license
category for "Out-of-State Wholesale Drug Distributors"
established in 2013 to provide oversight to large scale
drug compounders. She expounded that currently, the Board
of Pharmacy had no authority to regulate out-of-state
wholesale drug distributors and the bill provided the
authority. The legislation allowed Alaska to act to
eliminate wholesalers looking for loopholes in the
regulatory system and ensure that out-of-state applicants
seeking licensure comply with the same regulations as
Alaskan wholesalers. She reported that only one drug
wholesaler operated in Alaska; McKesson Drugs Company.
Ms. Conway relayed an incident relating to wholesale drug
distributors. She detailed that in 2012, contaminated
medications were distributed which resulted in the deaths
of people from meningitis. In 2012, a nationwide fungal
meningitis outbreak resulted in 751 patients in 20 states
being diagnosed and 64 patients in 9 states dying. The
outbreak was linked to a compounding facility in
Massachusetts. It was found that the employees were
producing medications in an unsafe manner in unsanitary
conditions and the company allowed the medications to be
shipped out anyway. The tragedy highlighted the dangers of
unregulated, large scale compounders. She communicated that
SB 37 ensured that prescriptions were pure, sanitary and
safe. Passage of the bill would create a more secure drug
supply chain and ensure that Alaskans were receiving non-
counterfeit, unadulterated medications. She delineated that
when a pharmacy, doctor, or hospital in Alaska ordered
supplies of prescription medications, they may go to the
one wholesale distributer in Alaska(McKesson), but they may
also order from one of hundreds of others in the Lower 48.
The bill required any out-of-state drug distributor or
outsourcing facility to follow specific guidelines
including: obtaining a license in Alaska, authorizing
inspection by a designee of the board, appointing an agent
before shipping, mailing, or delivering prescription drugs
to a licensee in the state or advertising in the state. She
pointed out that that last provision identified a
responsible party (agent) to serve subpoenas for citing
infractions or filing suit in case of problem. She
continued that an outsourcing facility must comply with the
Drug Quality and Security Act (DQSA) of 2013. She defined
that an "outsourcing facility" was a facility in one
geographical location that was engaged in the compounding
of sterile drugs for a facility at another geographical
location. They were companies that made large batches of
compounded drugs that had the highest risk of
contamination. The Division of Corporate, Business, and
Professional Licensing (DCBPL) estimated that registering
and regulating the drug wholesalers equated to
approximately 400 new licensees.
Ms. Conway offered that a provision of the bill created an
executive administrator position for the Alaska Board of
Pharmacy. The board had ever-increasing responsibilities
under several healthcare reform bills and opioid response
legislation that passed recently. The position would allow
the board more capacity to respond more quickly to issues
and concerns, manage the licensing of new wholesalers,
implement statutes and regulations, and manage the multiple
new responsibilities relating to the Prescription Drug
Monitoring Program (PDMP). The board currently relied on
the division for routine operations assistance. The
position would be paid by the fees supplied by the
wholesale drug distributor licensees along with current
licensee fees and would not impact the general fund.
1:59:17 PM
Representative Wilson questioned whether Ms. Conway was
aware that the Massachusetts facility was inspected but no
one performed any follow up. Ms. Conway deferred to a
pharmacist online to answer the question. Representative
Wilson was aware of the circumstances and relayed that the
Massachusetts manufacturer was regulated and fined. She was
concerned about the federal mandate requiring the
legislation and wondered what repercussions the state would
incur if the legislation was not adopted. Ms. Conway was
unsure what the federal government would do. She suspected
that the message to consumers would be that Alaska did not
care about the quality of its medicine. She thought that
Alaskan consumers expected the drugs to be manufactured in
a regulated facility that maintained quality control.
Representative Wilson declared that she did care but
explained that her concern focused on requiring the state
to perform the inspections. She thought the mandate would
result in additional liability for the state. She asked
whether her assumption was correct. Ms. Conway responded
that it was possible that the state would perform
inspections. However, since most other states required
licensure the criteria adopted by other states would likely
comply with Alaska's criteria. The inspection could just be
a matter of reciprocity with other states licensure that
would place an approved wholesaler in another state on an
Alaskan list of approved facilities. Representative Wilson
asked whether Ms. Conway was aware of any problematic
incidents with wholesalers in Alaska. Ms. Conway was not
aware of any incidents. She referred to a handout in
member's packets titled "The Deadly Counterfeit Drug Trade
Thrives in Alaska" (copy on file). She indicated that there
were several places in the wholesale drug distribution
process where counterfeiting actions could occur.
Representative Wilson asked how the bill worked. She asked
what provisions in the bill identified where the
counterfeiting actions could occur and prevented the
activity.
2:04:19 PM
Ms. Conway responded that bill licensed the entities of the
wholesale drug distributors, the outsourcing facilities,
and the third-party logistical providers; all would be
licensed under the bill. She maintained that the licensing
of all entities handling the drugs prevented counterfeit
activities. Representative Wilson mentioned that
compounding drugs were recently excluded in the state's
active employee health plan. She asked whether the
legislation would cover compound drugs with passage of the
bill. Ms. Conway deferred to the appropriate available
testifier to answer the question.
2:06:08 PM
Representative Kawasaki noted she had mentioned that
currently there were 400 out-of-state drug wholesalers
engaged in business activities in Alaska. He asked whether
his statement was correct. Ms. Conway answered that the 400
number was an estimate. She relayed that Alaskan
pharmacists avoided engaging with most of the out-of-state
drug wholesalers because they did not know who were
reputable. The division had informed her that many out-of-
state companies were inquiring whether the state required
licensing, some wanting to take advantage of the unlicensed
environment. There was a limited number of suppliers that
Alaska pharmacists would purchase drugs from and the bill
would provide the larger estimated pool of wholesalers.
Representative Kawasaki related a scenario where an out-of-
state drug wholesaler did not want to become licensed in
Alaska. He asked whether the bill contained transitional
language that allowed an Alaskan heath care entity to
continue to do business with them. Ms. Conway could not
imagine a wholesaler not wanting to sell to vendors in
Alaska and not obtaining a license. Representative Kawasaki
restated his question. Ms. Conway responded that all but 4
other states required licensure so the wholesalers were
registered in many other states and was common practice.
Representative Kawasaki asked whether the out-of-state drug
wholesaler regulations were standardized and similar in
every state. Ms. Conway replied that the state of Alaska
would apply the current set of regulations it applied to
McKesson to the out-of-state drug wholesalers.
2:10:55 PM
Representative Kawasaki asked why the Board of Pharmacy
could not just allow out-of-state drug wholesalers that met
the criteria of another state to operate in Alaska and gain
an Alaskan license by merely qualifying for licensure in
another state. He thought it would save the time and effort
required to develop regulation and inspect facilities. Ms.
Conway indicated that every state had adopted their own
criteria; some maybe more or less stringent. She restated
the possibility for reciprocity with states that had the
same criteria as Alaska's. She expounded that there was a
national certifier called the "Verified Accredited
Wholesale Distributor" (VAWD) but was only used by 3 states
due to the registration fee costs. However, 23 states
accepted the certification.
2:13:27 PM
Representative Pruitt guessed the transition time would be
established through regulation. He cited the two effective
dates in the bill, an immediate effective date allowing
time to establish regulations and the hiring of an
executive director. The second effective date was July 1,
2019 when the law would be implemented. He asked whether
the July 1 date offered enough time "to allow the
transition to take place."
SARA CHAMBERS, DEPUTY DIRECTOR, DIVISION OF CORPORATIONS,
BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT (via
teleconference), thought the time frame was adequate for
notifying involved entities and allowing them input in the
board's public process for regulation adoption.
Representative Pruitt asked whether the date provided
enough time for the public to provide input on the proposed
regulations. Ms. Chambers answered in the affirmative.
2:15:47 PM
Co-Chair Foster OPENED public testimony.
2:16:32 PM
RICHARD HOLT, CHAIR, ALASKA STATE BOARD OF PHARMACY,
ANCHORAGE (via teleconference), testified on behalf of the
board in support of the bill. He explained that the
legislation provided the board two imperative authorities:
to license out-of-state wholesale drug distributors who
were shipping pharmaceuticals into the state, and out-
sourcing facilities and whole sale logistics providers. The
other authority allowed the board to hire an executive
administrator using the licensing fees. The board
determined that the licensure was necessary to fulfill its
responsibility to ensure the practice of pharmacy was
acting in the best interest of Alaskans. He emphasized that
the out-of-state wholesalers shipped anything they wanted
to the state because of the lack of oversight from the
board. He relayed that the board's licensee examiner
received many inquiries from out-of-state wholesalers
asking whether the state required a license. He reiterated
that the state was unaware of what the wholesalers were
shipping into the state. He relayed that recently a
registered out-of-state wholesaler turned its license back
over to the state and choose to operate as an outsourcing
facility to avoid oversight. He commented that the board's
workload continued to increase, and the executive director
position was necessary to assist the board in carrying out
its statutory duties. He urged members to vote "yes" on the
bill.
Representative Kawasaki mentioned that the state typically
joined interstate compacts for protections and
efficiencies. He asked whether "it would be easier to
dovetail" off the other 47 states that already required
licensure. DR. Holt responded that when the board drafted
regulations they examined the provisions other states
adopted. The board would dovetail regulations that were
appropriate but would tailor regulations to ensure
Alaskan's safety and that they met the state's needs.
2:20:56 PM
Representative Wilson asked if Dr. Holt felt that the bill
would help restore state employee benefits for compounded
drugs. Mr. Holt replied that the state currently had
regulations for compounding in 12 AAC.52.440 [Alaska
Administrative Codes]. He suggested that the issue was an
insurance related issue. Representative Wilson conveyed
that the employees received notice that the coverage was
eliminated due to safety concerns, yet state retirees'
compounded drug prescriptions were still covered. She hoped
the bill would grant the state more confidence in the
safety of compounded drugs. She appreciated all the work
accomplished by the board. Dr. Holt affirmed that the bill
would provide that state more assurances regarding the
safety of compounding drugs.
2:23:11 PM
LEIF HOLM, BOARD OF PHARMACY, NORTH POLE (via
teleconference), wanted to echo Dr. Holt's sentiments on
behalf of the board in support of the bill. He offered his
testimony from the perspective of an independent
pharmacists. He conveyed that ultimately, pharmacists
wanted to have confidence that the medications they
purchased were safe. He relayed that he restricted his
purchasing with primarily one large wholesalers because he
could not quickly asses where the small wholesalers' drugs
were coming from. Pharmacists were always searching for the
lowest prices but revealed that it was potentially
dangerous with some of the "unscrupulous characters" that
were making substandard drugs, and the situation was
serious. He noted that the state currently regulated in-
state wholesalers and he did not believe it would take much
effort to implement the regulations. He mentioned the
likelihood of the board reciprocally accepting other states
standards and did not anticipate having to travel to
another state to do inspections. He was available for
questions.
Representative Kawasaki asked how Dr. Holm currently
determined who was a legitimate wholesaler. Dr. Holm voiced
that the situation was difficult. He elaborated that he
almost exclusively used the single wholesaler
AmerisourceBergen Corporation but at times he had to use
another wholesaler and was not able to reliably determine
the reputation of another supplier. He wished he could rely
on a state website that listed state licensed wholesalers.
Representative Kawasaki asked how comfortable he was with
using other state regulations and if he agreed that a
wholesaler who was reputable for another state was probably
a legitimate source for Alaska. Dr. Holm would agree as
long as the standards mirrored Alaska's criteria. He
deduced that he could go to another state's website to
determine whether a wholesaler was licensed and then check
the thoroughness of the regulations. He emphasized that he
trusted the decisions the board made and would rather
consult the state's licensure where he played a role.
Representative Kawasaki surmised that the bill provided for
an executive administrator at a range 23 attached to the
new licensure and wanted to find a less expensive way to
accomplish the licensing. He wondered whether there were
model regulations from one state that the board approved
of, whereby the board could adopt as their own rather than
using an executive administrator.
2:29:49 PM
Dr. Holm asked for a restatement of the concern.
Representative Kawasaki wanted to find out whether there
was a cheaper way to accomplish the licensure work by board
regulation. Dr. Holm answered that the position was covered
by the wholesale licensing fees. He noted that the
profession was constantly evolving, and it was difficult to
keep up with the changes. He countered Representative
Kawasaki's notion that the board could do the regulatory
work on their own. He remarked on the busy lives of board
pharmacists. He shared that he had four jobs with his
various pharmacies besides carrying out his board duties,
which was very time consuming. He noted that other boards
like the medical board and nursing board had an executive
administrator. He reported that in person meetings were
much more effective than teleconferenced meetings and
reported that the board was restricted to two in person
meetings per year. He believed that the executive position
would act as a liaison, board work would be expedited, and
thought it would be easier for the board to stay on top of
what other states were doing. He would find it arduous to
find the time to analyze many other states regulations. He
acknowledged that he had volunteered for the board, but it
did not mean the job did not require significant effort.
2:33:18 PM
Representative Wilson wondered whether a complaint against
an out-of-state wholesaler would force a state investigator
to travel to the state to perform an investigation, which
was typically a significant cost to the board. She asked
whether the investigatory costs would be paid through the
wholesale licensure or the profession's general licensure
fees. Dr. Holm responded that he did not foresee a scenario
that required an Alaskan inspector to travel out of state.
He thought that as violations were occurring they would be
reported to all states boards. Representative Wilson
wondered how the licensure funds would be disbursed in the
eventuality of an investigation. Dr. Holm did not know. He
supposed that inspection costs would come out of the
pharmacy licensure "pot" that included fees from the
technicians, pharmacists, and wholesalers.
Representative Wilson spoke about compounding
prescriptions. She asked how much revenue Mr. Holm had lost
because the state eliminated employee coverage for
compounded medications. Dr. Holm answered he lost thousands
of dollars in revenues and many patients were unable to
obtain their medications due to high costs. Representative
Wilson asked if the state would realize it made a mistake
due to the safety guarantees embedded in the bill. Dr. Holm
stated it depended on whether it was done for safety or
financial reasons. He could not speak to exactly what would
happen. Representative Wilson thanked Mr. Holm and
acknowledged his work.
2:36:47 PM
Representative Pruitt asked whether the board was
comfortable with the licensure fee structure that would
facilitate supporting a new executive director position. He
asked whether the licensing fees would increase. Dr. Holm
responded that the board did not expect an increase in
existing licensing fees. The fees collected from the
wholesale licenses were expected to fully fund the
position. He spoke with wholesalers that supported the
licensure and expected to pay licensing fees.
Representative Pruitt recounted that there was an
expectation the board would not need to increase license
fees to pay for the executive director even though the
director would carry out duties other than duties required
for the wholesaler licensing. He continued that there was a
problem with many boards where the current fee structure
could not cover the cost of an investigation. He asked if
the board was concerned that when out-of-state
investigations did occur the wholesaler licensing fees
would increase causing "push back" from the wholesalers.
2:40:15 PM
Dr. Holm understood Representative Pruitt's point and
thought it was hypothetical regarding investigations. He
understood the larger investigatory issues pertaining to
boards. He noted that the pharmacy board was a well-funded
board that had never operated with a negative balance. He
opined that the board would deal with the issue if or when
it happened. He thought safety was the number one concern
with moving forward with the licensure. Representative
Pruitt agreed that safety should be the primary concern. He
wanted the industry to know that the expectation of the
state was the licensure used a "fee for service model" and
fees could increase to cover board costs. He asked whether
the board was comfortable with the structure. He supported
moving the bill forward if the board was in support. Dr.
Holm could not speak for everyone and could not speak to
how the board would decide on future fee increases but he
would support "whatever decision needed to be made by the
board to make this happen."
Representative Tilton referred to the fiscal note from
DCCED that stated there was no fiscal impact on the public
or private sectors in the state as the licensing would
impact entities outside of the state [second paragraph on
page 2 of the fiscal note]. She was concerned that a
potential impact could happen in the future. She wondered
whether any latent impact could increase costs to the
consumer. Mr. Holm answered that he did not anticipate any
fiscal impact on the wholesaler; the fees were minimal for
a wholesaler. He deduced that the bill's impact could
potentially lower costs by offering more possibilities for
the pharmacists to source lower costs drugs.
2:44:50 PM
BARRY CHRISTENSEN, ALASKA PHARMACIST ASSOCIATION, KETCHIKAN
(via teleconference), spoke in support of the legislation
on behalf of the association. He reported that the
association attempted to address the issue through
legislation for over four years. The membership felt
strongly that the pharmacies needed the safety assurance
and a trusted source to identify and verify wholesalers. He
concurred with the previous statements regarding the
inability to validate wholesalers. He added that the
national association for the drug wholesale industry
reported its support for the bill as currently written. He
reiterated that the licensure was the standard practice. He
appreciated the work of the board and endorsed the need for
the administrative position.
Co-Chair Foster CLOSED public testimony.
Representative Wilson reiterated her question regarding the
distribution of investigative costs under the new license.
Ms. Conway understood that any investigatory cost was borne
by the entity being investigated. She voiced that the
sponsors envisioned that investigations would be carried
out by contracting out an investigatory work to a qualified
provider in the same state the investigation was necessary.
She stated if there was a problem in California, they would
contract with the proper entity in California. She did not
envision "sending people out all across the nation to
inspect." Representative Wilson remarked that
investigations had been "lopsided" with most of the state's
boards increasing licensing fees. She reiterated her
question regarding how a costly investigation would affect
the boards licensing fees. Ms. Conway deferred to Ms.
Chambers for the answer.
2:50:53 PM
Ms. Chambers answered that the division, which included all
43 of the state's license programs, did not have the
statutory authority to recoup investigative costs directly
from the entity being investigated. She relayed that
penalties and fines imposed were deposited into the general
fund. The statutes required that investigatory costs were
born by all programs under their licensing board. The
division tried to determine whether there were
disproportionate investigatory costs per license type. She
hypothesized that if investigative costs for out-of-state
wholesalers were significantly higher than costs for Alaska
pharmacies the division would work with the board to raise
the wholesaler licensing fees. She relayed that HB 90 OCC.
(Licensing Fees; Investigation Costs) was introduced to
remedy the situation or there might be legislation in the
future to address the problem. However, currently the
division could not charge any investigative fees or recoup
investigative costs; the money was recovered from the
licensing program. Representative Wilson understood the
issue. However, she wondered how wholesaler license
investigatory costs would be split under the pharmacist
licensure. Ms. Chambers responded that AS 08.01.065
required that fees were grouped together but allowed the
discretion for the board to increase or lower fees
according to license type. However, there was not explicit
language that separated license type; the statute covered
all licenses regulated under a particular board.
Vice-Chair Gara reviewed the one previously published
fiscal impact note from the DCCED, FN1 (CED). The bill
reflected the cost recovered from board fees in the amount
of $173.3 thousand in FY 2019 and decreased to $157.5
thousand in the out years.
2:55:14 PM
Representative Kawasaki MOVED to REPORT CSSB 37(FIN) out of
committee with individual recommendations and the
accompanying fiscal note.
There being NO OBJECTION, it was so ordered.
CSSB 37(FIN) was REPORTED out of committee with a "do pass"
recommendation and with a previously published fiscal
impact note: FN2 (CED).
2:56:00 PM
AT EASE
3:00:20 PM
RECONVENED