S2627

An Act concerning pharmaceutical wholesale distributors and supplementing Title 24 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. As used in this act:

“Customer” means an entity located in the State that orders a drug or drugs from a wholesale distributor.

“Designated representative” means the same as that term is defined in section 5 of P.L.2005, c.206 (C.24:6B-14).

“Director” means the Director of the Division of Consumer Affairs in the Department of Law and Public Safety.

“Drug” means the same as that term is defined in section 5 of P.L.2005, c.206 (C.24:6B-14), and shall include “controlled dangerous substances” as defined in section 2 of P.L.1970, c.226 (C.24:21-2).

“Suspicious order” means an order of unusual size, an order of unusual frequency, an order that deviates substantially from an historic pattern of orders placed by the customer, an order from a customer that has not previously ordered from the distributor, an order from a customer that has been subject to disciplinary action by the State or the federal Drug Enforcement Agency, or an order that otherwise is deemed unusual by the wholesale distributor.

“Wholesale distributor” means a wholesale distributor of prescription drugs, as defined in section 5 of P.L.2005, c.206 (C.24:6B-14), which is licensed by the Department of Health, and registered with the department as required by section 2 of P.L.1970, c.226 (C.24:21-10).

b. A wholesale distributor shall maintain a system to assess, identify, and report suspicious orders of drugs, and a system to collect and store the customer information required by section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill). A wholesale distributor shall annually train employees responsible for the processing of orders on these systems and their uses.

c. The designated representative of the wholesale distributor shall designate two employees who shall, before an order is fulfilled and shipped, independently assess whether the order is a suspicious order. Each of the two designated employees of the wholesale distributor shall determine that the suspicious order is not likely to be diverted from legitimate, lawful channels of distribution before the order may be shipped to the customer.

d. If an order is identified as a suspicious order, the wholesale distributor shall report the order, whether fulfilled and shipped to the customer or withheld by the wholesale distributor, no later than seven days following its identification as suspicious, to the division in a form and manner to be determined by the director.

e. A wholesale distributor shall report to the division in a form and manner to be determined by the director, a zero report if no suspicious orders have been identified during a calendar month.

2. A wholesale distributor shall exercise due diligence to determine the typical or expected transactions of its customers in order to assist in the identification of orders that are likely to be diverted from legitimate lawful channels of distribution. Due diligence shall include, but is not limited to, the following measures to be conducted by the wholesale distributor prior to fulfilling an initial order by a new customer, and on an annual basis for all customers:

a. the submission of requests for information to the customer through questionnaires or other means, and the undertaking of research to confirm the accuracy and validity of information provided to the wholesale distributor;

b. the review of customer drug utilization reports;

c. the review of the payment methods accepted by each customer, the ratio of controlled substances to non-controlled substances in the customer’s orders and in the customer’s overall sales, and the proportion of out-of-State patients or entities served by the customer compared to the proportion of in-State patients or entities, if applicable; and

d. the undertaking of customer site visits to supplement the above information.

3. A wholesale distributor that fails to report a suspicious order as required by this act shall be liable to a civil penalty of not less than $500 nor more than $2500 for the first offense, and not less than $1000 nor more than $5000 for the second or subsequent offense. The director shall advise the Commissioner of Health of a wholesale distributor’s failure to report suspicious orders hereunder, and the commissioner may, in the commissioner’s discretion, suspend, revoke, or refuse to renew the license of a wholesale distributor that repeatedly fails to report a suspicious order as required by this act.

4. This act shall take effect 90 days following the date of enactment, but the director may take such anticipatory action in advance thereof as is deemed necessary to effectuate the provisions of this act.

STATEMENT

This bill requires that pharmaceutical wholesale distributors maintain a system to assess, identify, and report suspicious orders of drugs and a system to collect and store certain customer information required by the bill. The bill requires the designated representative of the wholesale distributor to designate two employees who, before the order is fulfilled and shipped, are to independently assess whether an order is a suspicious order. The bill defines “suspicious order” as an order of unusual size, an order of unusual frequency, an order that deviates substantially from an historic pattern of orders placed by the customer, an order from a customer that has not previously ordered from the distributor, an order from a customer that has been subject to disciplinary action by the State or the federal Drug Enforcement Agency, or an order that otherwise is deemed unusual by the wholesale distributor.

The bill requires that each of the two designated employees of the wholesale distributor determine that the suspicious order is not likely to be diverted from legitimate, lawful channels of distribution before the order may be shipped to the customer. Further, the bill requires that a wholesale distributor report an order that is identified as a suspicious order to the Director of the Division of Consumer Affairs in the Department of Law and Public Safety, who shall determine the form and manner of the reporting. If a wholesale distributor does not identify any suspicious orders during a calendar month, it shall report accordingly to the director.

The bill also requires that a wholesale distributor exercise due diligence to assist in the identification of orders that are likely to be diverted from legitimate lawful channels of distribution, by undertaking, at a minimum, the following measures prior to fulfilling an initial order by a new customer, and on an annual basis for all customers:

· the submission of requests for information to the customer through questionnaires or other means, and the undertaking of research to confirm the accuracy and validity of information provided to the wholesale distributor;

· the review of customer drug utilization reports;

· the review of payment methods accepted by each customer, the ratio of controlled substances to non-controlled substances in the customer’s orders and in the customer’s overall sales, and the proportion of out-of-State patients or entities served by the customer compared to the proportion of in-State patients or entities, if applicable; and

· the undertaking of customer site visits to supplement the above information.

The bill also establishes penalties for failure to report a suspicious order as follows: a civil penalty of not less than $500 nor more than $2500 for the first offense, and not less than $1000 nor more than $5000 for the second or subsequent offense. The bill also provides that the director advise the Commissioner of Health of a wholesale distributor’s failure to report suspicious orders, and grants the commissioner discretion to suspend, revoke, or refuse to renew the license of a wholesale distributor that repeatedly fails to report a suspicious order as required.