SENATE BILL NO. 37 "An Act relating to the Board of Pharmacy; relating to the licensing and inspection of certain facilities located outside the state; relating to drug supply chain security; and creating a position of executive administrator for the Board of Pharmacy." 9:33:55 AM Vice-Chair Bishop MOVED to ADOPT proposed committee substitute (CS) for SB 37, Work Draft 30-LS0191\R (Bruce, 4/15/17). Co-Chair MacKinnon OBJECTED for discussion. JANE CONWAY, STAFF, SENATOR CATHY GIESSEL, discussed the document "Sectional Analysis CS for Senate Bill 37(FIN) - Version R" (copy on file): Section 1: Amends AS 08.80.030(b) by adding a new subsection: (14): Establishes qualifications and duties of executive administrator. Executive administrator is delegated authority in order to conduct board business. Section 2: Amends AS 08.80.030(b) by adding a new subsection: (15): Amends and allows licensing and inspection for out-of-state drug distributors, third-party logistics providers and outsourcing facilities; Section 3: Amends AS 08.80.030 by adding a new subsection: AS 08.80.030(c): Specifications for facilities, equipment, personnel, and procedures for control of drugs in compliance with the federal Drug Supply Chain Security Act. Section 4: Amends AS 08.80.157 by adding a new subsection: (k): Requires wholesale drug distributors, third-party logistics providers, and outsourcing facilities outside the state under AS 08.80.159, to be licensed. Section 5: Amends AS 08.80 by adding a new section: Sec. 08.80.159: Requires that a wholesale drug distributor, third party logistics provider, or outsourcing facility have a license in Alaska before shipping, mailing, or delivering prescription drugs to a licensee in the state or before advertising in the state, an agent must be appointed in the state, and a designee of the board must authorize inspection of the facility. An outsourcing facility, in addition, must comply with the federal Drug Quality and Security Act of 2013. The board may require an inspection of facilities located outside of the state, approve a designee to inspect. The board shall adopt regulations to implement this section. Section 6: Amends AS 08.80 by adding new section to Article 2: Sec. 08.80.270: Allows the Board to create an executive administrator position. Defines the role and salary range of the executive administrator. Section 7: Amends AS 08.80.480 by adding a new paragraph: AS 08.80.480(37): Defines "outsourcing facility" AS 08.80.480(38): Defines "third party logistics provider" Section 8: Amends AS 39.25.120(c)(7) by adding (Q) Board of Pharmacy Sections 9, 10, 11: Provides transition language and effective date clause Ms. Conway noted that Sections 1, 6, 8, and 9 had immediate effective dates. Sections 2, 3, 4, 5, and 7 had an effective date of July 2018; which gave the department time to set up the licensing program. The department had recommended the time frame. Co-Chair MacKinnon asked if Ms. Conway could point out the difference between the CS from the Senate Labor & Commerce Committee, and the CS being considered by the committee. 9:38:55 AM AT EASE 9:39:48 AM RECONVENED Ms. Conway related that the Senate Labor and Commerce Committee had removed two lines that had stated the executive administrator shall serve as a liaison to the legislative and executive branches of state government and the media, and other state pharmacy boards. She added that there had been other changes in the current CS to reflect the companion bill HB 9. She asserted that the companion bill stated the full intent of the legislation. Additionally, the companion bill established the range and partially-exempt status of the executive administrator position, which had not been in the Senate Labor and Commerce Committee version of the bill. She informed that various effective dates had been added to the CS being considered. Co-Chair MacKinnon WITHDREW her OBJECTION. There being NO further OBJECTION, it was so ordered. The CS for SB 37(FIN) was ADOPTED. 9:41:14 AM SENATOR CATHY GIESSEL, SPONSOR, referenced the end of the bill. She noted that the bill was by request of pharmacists, and authorized an executive administrator position for the Board of Pharmacy. She discussed Medicaid reform and the focus on the opioid crisis in the state. She stated that there had been many new duties delegated to the Board of Pharmacy. Heretofore the board had relied on licensing division staff to perform the administrative duties of the board. Considering the additional responsibilities, she emphasized that the board needed a designated executive to oversee functions. She added that establishment of the position was one of the key pieces of the proposed legislation. Senator Giessel stated that the bill addressed where prescriptions came from. She discussed the origin of prescription medications, and informed that there were manufacturers in the Lower 48 that distributed medications to various pharmacies in the country. She informed that Alaska was one of only two states that did not license the medication distributers. She mentioned the Drug Quality Security Act of 2013, which was a federal law that required a license for distributors, and would ensure that medications shipped to Alaskan pharmacies were safe. She referred to adulterated/contaminated medications that had caused deaths in the past. She detailed that individuals had died of meningitis as a result of the contaminated medications. The bill would establish the ability for the Board of Pharmacy to license the outsourcing facilities and drug distributors, and would authorize an inspection. The board would delegate an individual to do the inspection or accept another pharmacy board's authorization by reciprocity. She confirmed that the bill would not result in more travel expenses for the board. Senator Giessel emphasized the SB 37 was a public safety bill, and that it would help the Board of Pharmacy execute all the duties that the legislature asked them to do. She relayed that there were six pharmacists that could provide information on the bill with great detail. Senator Hughes thanked the sponsor for bringing the bill forward. She asked if other states that had enacted such licensure had seen any reduction in access to medications. Ms. Conway thought the pharmacy board might better answer the question. 9:45:32 AM Senator Olson asked about the reported deaths from adulterated medications, and wondered if they were outside of Alaska. Senator Giessel confirmed that the deaths had not been in the State of Alaska. Senator Olson asked if the states in which the deaths occurred had the legislation in place. Senator Giessel relayed that a nationwide fungal meningitis outbreak had occurred in 20 states in 2012, and occurred in Massachusetts at a compounding pharmacy. She clarified that compounding pharmacies were included in the bill. She was not sure if the establishment had been licensed and inspected or not. Ms. Conway thought that the State of Massachusetts did not have licensing like what was proposed in the bill. Senator Olson asked theoretically if the legislation had been in place in Massachusetts, if people would have been protected. Ms. Conway answered in the affirmative. Senator von Imhof understood that the fiscal note stated that the total amount of revenue collected approximately equalled the occupation's actual regulatory cost. She asked if the sponsor had completed an analysis as to a potential increase in license fee to support the additional fiscal note. Senator Giessel advised that the Board of Pharmacy had suggested a licensing fee of about $500 per wholesale distributor or outsourcing facility. She relayed that there was a very large number of such facilities, therefore it was ultimately believed to be a zero fiscal note. 9:48:23 AM Co-Chair MacKinnon OPENED public testimony. SCOTT WATTS, PHARMACIST, JUNEAU, spoke in support of the bill. He stated that he had been a local pharmacist for the previous 27 years, and owned and operated two retail pharmacies in Juneau. He reasoned that the legislation would create a secure drug supply chain by allowing the licensing and inspection (if needed) for wholesalers outside the state. He stated that all his purchases of medication occurred outside of Alaska, most of which came from one of three major wholesalers. He relayed that his business received many calls from smaller distributors claiming to have lower prices. He wanted assurance that any distributor to the State of Alaska would have unadulterated medications that had been stored properly. He discussed the opportunity to pursue lower cost products if the facilities were vetted properly. He thought the bill would allow the Board of Pharmacy to ensure that medications were safe for Alaskan residents. 9:51:52 AM Senator Hughes asked if there was a national certification for facilities, or if the state would be responsible to inspect facilities or obtain proxy verification. Mr. Watts stated that there were national certifications, and many wholesalers could be certified or licensed through the State of Alaska by reciprocity without duplicating the licensures. Senator Hughes asked if it was anticipated that in order for a facility to be licensed, it would need a national certification. Mr. Watts was not aware of the details, and thought the board might be able to provide more information. Senator Hughes thought that a national certification would provide a level of assurance for the state. Senator Olson asked how the bill would impact the cost of medication for patients. Mr. Watts did not expect there would be any difference to the cost of medication as a result of the bill. Senator Olson suggested that someone had to pay for the inspection of facilities. Mr. Watts thought that the cost would not get passed on from the pharmacy. 9:55:22 AM LEIF HOLM, CHAIR, BOARD OF PHARMACY, FAIRBANKS (via teleconference), testified in support of the bill. He stated he was the owner of three independent pharmacies. He echoed the comments of the previous testifier. He thought the bill would hold entities accountable to the same standards of practice as those doing business from within the state. He thought the proposed requirements were no different from most professional licensees wishing to do business in the state from outside. He relayed that the board felt the proposed position was long overdue, and was a necessity as the board continued to fall behind with regard to timely licensing. The board felt the position would greatly increase efficiency in licensing, as well as the ability to stay up-to-date on statutes and regulation changes. He stated that it was the intention of the board that the funding for the position would rest solely with the board, and would be easily attainable through new licensing fees. The position would not require an increase in fees to those already licensed by the board. Co-Chair MacKinnon asked why the board chose the name "administrator" rather than "director" for the proposed position. She asserted that other boards had commonly used the title of executive director. Mr. Holm stated that he only became familiar with the term after serving on the board. 9:58:05 AM RICHARD HOLT, VICE CHAIR, BOARD OF PHARMACY, WASILLA (via teleconference), spoke in support of the bill. He stated that he was the Vice-Chair of the Board of Pharmacy. He thought the sponsor had done a superlative job of presenting the details of the bill. He thought the sponsor had provided clarity around the issue of patient safety and understanding where medications came from out of state. He discussed the complexity and degree of medication regulation in the bill, and through other legislation. He addressed the question of reducing the number of sources for medication distribution. He recalled that previous testimony had indicated there were over 1,200 wholesale medication distributors in the country. He thought the State of Oregon had about 400 or 500 distributors. He did not think the licensure would decrease the number of sources for patients in Alaska, but thought it would increase safety. Mr. Holt referred to the executive administrator position and the fiscal note, and clarified that the bill proposed to create three additional licensing categories. He did not anticipate seeing any license fee increases for existing licensees, but the proposed position would be funded through the licensing category created through the bill. He thought the bill was needed to ensure the safety of patients and assist the board with its administrative function. Co-Chair Hoffman asked Mr. Holt if the bill would have an impact on Alaska Native health corporations. Mr. Holt was not sure of any impact to Alaska Native health corporations, as he did not know the source of the corporation's medications. 10:01:10 AM Senator Hughes asked if Mr. Holt could speak to her earlier question about national certification for facilities. She thought the requirement for all distributors to be inspected was putting a lot of pressure on the board, and on the executive administrator. Mr. Holt was not aware of the state requiring a national certification. He informed that each state had regulation governing its own practice. The board had discussed a Verified Accredited Wholesale Distributors (VAWD) designation which was an inspection through the National Board of Pharmacy; but he did not know if it was required in every state. He stated that the board would discuss the matter when it was creating regulations, so that there would be standardized approach. 10:03:06 AM BARRY CHRISTIANSEN, ALASKA PHARMACIST ASSOCIATION, KETCHIKAN (via teleconference), testified in support of the bill. He relayed that he was a practicing pharmacist, and served as Co-chair of the Alaska Pharmacists Association Legislative Committee. He informed that the association was made up of pharmacies, pharmacists, and pharmacy technicians throughout the state. He thought the bill was very necessary. He spoke in support of previous testimony, and stated that the association was in full support of the legislation. 10:04:11 AM GERALD BROWN, SELF, FAIRBANKS (via teleconference), spoke in support of the bill. He relayed that he was a pharmacist and an independent pharmacy owner. He thought the sponsor had done an excellent job of presenting the bill. He thought the legislation was needed, and without it there was no way of knowing the origin of medications. He asked for the support of the committee. 10:05:30 AM DIRK WHITE, PHARMACIST, SITKA (via teleconference), testified in support of the bill. He relayed that he was a past board member of the Board of Pharmacy. He referred to the Drug Quality Security Act. He stated that there was federal legislation moving forward to allow broad drug importation to the United States. He thought it was more important than ever to have assurance that medications were safe. He addressed the VAWD, which he likened to a Good Housekeeping Seal of Approval for a wholesaler. He thought many states would use the designation as verification. He described the designation as a "very thorough top to bottom inspection" of how drugs were handled. 10:08:24 AM Senator Olson considered the levels of existing inspection, and thought there was an implication that the 2013 Drug Quality Security Act had not been adequate. He wondered what added benefit the proposed legislation would provide. Mr. White discussed existing medication quality control, including inspections by the United States Food and Drug Administration. He thought any increase in cost as a result of the bill would be absorbed by wholesalers. Senator Hughes asked if the state was currently bringing in medication from wholesalers or suppliers outside of the United States. She wondered if the bill would give authority to require licensure for entities out of the country. Mr. White stated that currently pharmacists were not legally allowed to import medications from outside the country for resale. He stated that there were many companies that manufactured drugs outside the United States (U.S.). He believed that there had been legislation to allow for the import of drugs (during the Clinton administration), but it had been struck down by the U.S. Department of Justice. He added that it was possible to purchase personal medications outside the country. 10:12:56 AM Co-Chair MacKinnon CLOSED public testimony. Vice-Chair Bishop discussed FN1(CED), OMB Component number 2360. He detailed that there was an initial cost of $184,200 in FY 18; and $157,500 annual cost from FY 19 through FY 23. There would be a cost of $136,500 for one permanent full-time executive administrator at range 23. There was a travel cost of $6,000 for the administrator to attend four board meetings per year. There was a legal cost for $16,700 to help amend regulation, and to include printing and postage. There was a $15,200 cost in reimbursable service agreements; and $10,000 in commodities. He read the last paragraph from the analysis on the second page of the fiscal note: Professional licensing programs within the Division of Corporations, Business and Professional Licensing are funded by Receipt Supported Services, fund source 1156 Rcpt Svcs (DGF). Licensing fees for each occupation are set per AS 08.01.065 so the total amount of revenue collected approximately equals the occupation's actual regulatory costs. Co-Chair MacKinnon set the bill aside. SB 37 was HEARD and HELD in committee for further consideration.