A new declaratory statement from Florida regulators clarifies the restrictions on intracompany sales of pharmaceuticals.  Previously, if one pharmacy in Florida wanted to send a bottle of prescription medicine to its sister pharmacy down the street, it had to obtain a type of wholesale drug distributor permit, as well as provide pedigree papers for the drug.  However, the new decision means intracompany sales are acceptable without such permit or pedigree.

The Florida Department of Business and Professional Regulation, Division of Drugs, Devices and Cosmetics ("Department") issued the declaratory statement in response to a request from Publix Super Markets, Inc.  Florida law requires wholesale distributors of pharmaceuticals to obtain a permit from the Department. §§ 499.01(1)(d), (2)(d), 499.003(54), Fla. Stat.  The law does not include an exemption for intracompany sales.  State law provides an exemption for drug distributions by entities under "common control", but the state exemption would still require the distributor to obtain a restricted drug distributor's permit.

However, the federal Drug Quality and Security Act ("DQSA") became law in November 2013, and in very broad language, it preempts state drug wholesale licensing laws.  The law requires a uniform national system for tracking and tracing prescription drugs through the supply chain and a uniform licensing system for prescription drug wholesale distributors, repackagers, and third-party logistics providers.  DQSA amended section 503(e) of the federal Food, Drug and Cosmetic Act, adding an exemption from the definition of "wholesale distribution" for "intracompany distribution among members of an affiliate", but that language does not go into effect until January 1, 2015.  However, the preemption language allows reliance on the Prescription Drug Marketing Act of 1997's exemption to the definition of wholesale distribution for intracompany sales. 

As a result, the Department agreed that DQSA preempts state licensing laws that are inconsistent with the law.  The Department's declaratory statement makes the following conclusions.  Although they are specific to Publix, they show how the Department would likely treat drug distributions by other pharmacies under common ownership in Florida.

1. Publix pharmacies' sale of prescription drugs from one Publix pharmacy to other Publix pharmacies is not the wholesale distribution of prescription drugs
2. Publix pharmacies' transfer of prescription drugs from one Publix pharmacy to other Publix pharmacies is not wholesale distribution of prescription drugs so long as such transfers are intracompany sales.
3. Publix pharmacies' sale of prescription drugs from one Publix pharmacy to other Publix pharmacies does not require a Florida prescription drug wholesale distributor permit.
4. Publix pharmacies' transfer of prescription drugs from one Publix pharmacy to other Publix pharmacies does not require prescription drug pedigrees to be provided at this time, so long as such transfers are intracompany sales.  In the future, federal tracking and tracing requirements may apply.
5. Publix pharmacies' sale of prescription drugs to the Publix chain pharmacy warehouse is not the wholesale distribution of prescription drugs.
6. Publix pharmacies' transfer of prescription drugs to the Publix chain pharmacy warehouse is not the wholesale distribution of prescription drugs, so long as such transfers are intracompany sales.
7. Publix pharmacies' sale of prescription drugs to the Publix chain pharmacy warehouse does not require a Florida prescription drug wholesale distributor permit and does not require Publix to provide pedigree papers for these returns.
8. Publix pharmacies' transfer of prescription drugs to the Publix chain pharmacy warehouse does not require a Florida prescription drug wholesale distributor's permit, so long as such transfers are intracompany sales, and does not require Publix to provide pedigree papers for these returns.

 
Nevertheless, although intracompany sales are exempt, pharmacies that engage in other, non-exempt transactions still must obtain a Florida prescription drug wholesale distributor permit and provide a federal drug pedigree, if required.

Key Takeaways:

Corporate Florida community pharmacy businesses with more than one pharmacy may engage in intracompany sales of prescription drugs among their pharmacies without obtaining a retail pharmacy wholesale distributor permit and without providing a drug pedigree.

Pharmacies should still track these drug sales so they will have drug inventory documentation needed to defend a private or government pharmacy inventory audit.

Hospital systems should be mindful of the Robinson-Pattman and contractual "own use" requirements if they engage in intracompany sales of drugs among hospital pharmacies. Thus an institutional pharmacy may not be able to engage in an intracompany sale of own use drugs to the hospital's community pharmacy, but institutional to institutional and community to community should be acceptable.

The broad federal preemption likely also applies to other states' (beyond Florida) wholesale prescription drug distribution requirements which are inconsistent with the DQSA, but potentially impacted companies should carefully review any situations outside Florida.  Even companies in Florida should consult with their attorneys to ensure their actions fall within the exemptions.