September 16, 2015

The old saying, “everything old is new again,” is becoming increasingly true in the pharmacy industry. In the not-too-distant past, the corner pharmacy served as an important source of health information and related services, in addition to dispensing prescription drugs and selling over-the-counter medications and health products. Today, as technology and the scope of pharmacy practice continue to evolve, pharmacies are again expanding into new business opportunities and areas of patient treatment. These services include complex compounding methods, specialty pharmaceutical drugs and related supply-chain issues. 

While this growth is exciting, it does raise legal issues that must be addressed. One question is of particular importance: Does a dispensing pharmacy that is providing — or plans to provide — expanded services possess the requisite license (or licenses) and a mandate to engage in such business and professional activities?

As an example, consider a retail pharmacy that plans to act as a wholesale distributor of various drug products to other pharmacies or to health care practitioners (with or without an identifiable patient at the time the drug is sold). In order to engage in this activity, our would-be wholesale distributor should possess an additional wholesale distribution license (barring an existing exception) that stands apart from the required retail pharmacy license issued to it by the state. 

Since drug supply-chain dispensing/distribution activities are typically driven by state law, legal counsel should conduct, on behalf of a pharmacy, a state-specific legal analysis that can identify the licensure requirements for a proposed business activity. If drug supply-chain activities will cross state lines, the analysis should reflect this expanded activity: the laws and regulations of each state in question should be fully understood to ensure compliance. 

For certain business activities under consideration by a pharmacy, federal law should also be reviewed. This is particularly important given recently enacted federal legislation, the Drug Supply Chain Security Act (DSCSA), under which certain state licenses are required at the wholesale level, and a separate type of licensing is required at the third-party logistics provider level.

Failure to ensure full licensure compliance and, as a result, engaging in the unauthorized practice of pharmacy or wholesale drug distribution may prompt a state board of pharmacy or other enforcement body to launch an enforcement action. Based on the severity of the unauthorized activity, such enforcement actions can result in stiff penalties that can include monetary penalties as well as probation, suspension or revocation of existing licenses. Until the proper licensure is obtained or the pharmacy mounts a successful challenge, any unauthorized business activities identified in the action also will be prohibited. 

Although the majority of government licensure requirements have been well established, a few pharmacies will be tempted enough by these potential opportunities to attempt to bypass the licensing process and engage in unauthorized business practices. It is important that all pharmacies appreciate the severity of the potential consequences arising from failure to comply with licensing requirements. 

In most cases, evaluating the relevant laws and obtaining the appropriate license (or licenses) is a relatively simple process — far easier than becoming a test case for a state board of pharmacy or another government body. Litigation is expensive and the harm to the business and its customer relationships can be equally costly. Ultimately, it is better to engage in bona fide, licensed business activities than to run the risks of an encounter with an enforcement officer.

Please contact your Much Shelist attorney if you have questions about state and federal pharmacy, wholesale distribution and other licensing requirements. 

This article contains material of general interest and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Under applicable rules of professional conduct, this content may be regarded as attorney advertising.