Legislature(2017 - 2018)SENATE FINANCE 532

04/17/2017 09:00 AM FINANCE

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+ Bills Previously Heard/Scheduled: TELECONFERENCED
Heard & Held
Heard & Held
Heard & Held
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,                                                                       
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                                                                    
     (14):   Establishes   qualifications  and   duties   of                                                                    
     executive  administrator.  Executive  administrator  is                                                                    
     delegated   authority  in   order   to  conduct   board                                                                    
     Section  2:  Amends AS  08.80.030(b)  by  adding a  new                                                                    
     (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                                                                    
     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                                                                    
     (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                                                                    
     AS 08.80.480(37): Defines "outsourcing facility"                                                                           
     AS  08.80.480(38):   Defines  "third   party  logistics                                                                    
     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                                                                                                                    
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                                                                    
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                                                                    
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                                                                    
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                                                                    
Senator Hughes  asked if  it was  anticipated that  in order                                                                    
for  a facility  to be  licensed, it  would need  a national                                                                    
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                                                                    
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                                                                    
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                                                                    
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                                                                    

Document Name Date/Time Subjects
CSSB 37 (FIN) Sectional Analysis version R 4-14-17.pdf SFIN 4/17/2017 9:00:00 AM
SB 37
SB 37 Work Draft Version R.pdf SFIN 4/17/2017 9:00:00 AM
SB 37
CS SB 37 (FIN) vsn R Sponsor Statement.pdf SFIN 4/17/2017 9:00:00 AM
SB 37
SB 37 CSSB 37(SFIN) Responses to Questions 4-17-17 cg.pdf SFIN 4/17/2017 9:00:00 AM
SB 37