It is generally known that a prescription drug manufacturer must obtain state licenses in order to legally distribute product. The number of licenses required varies depending upon the method of distribution - a facility that physically ships product requires licenses in more jurisdictions than a manufacturer that uses a third-party logistics provider (“3PL”) to ship its products. But what about devices? What device companies are beginning to realize is that they too have licensing requirements in numerous states. The state statutes and regulations do not, however, always make this clear and several jurisdictions have stealth requirements for device manufacturers that can elude even a well trained eye.
Kentucky is one such stealth device jurisdiction. A cursory reading of the Kentucky statute would give device manufacturers reason for celebration – “A wholesale distributor shall be licensed by the board under this section prior to engaging in the wholesale distribution of prescription drugs in the Commonwealth.” Clearly the device company can skip over Kentucky and move on to the next state. Or can it? Let’s turn next to the definition of “wholesale distributor.” Surely this will provide some additional assurances. Kentucky defines a wholesale distributor as “an entity engaged in the wholesale distribution of prescription drugs.” “Even better” you might think. Surely the term “prescription drug” is clear and unambiguous. Everyone knows that a device is not a drug.
Let’s check and see where that leads us. The definition of drug includes “Articles, other than food, intended to affect the structure or function of the body of man or other animals.” Looking further, we do not see the familiar language that it excludes devices. The breadth of this definition might raise some concern for a device company. But wait, the wholesaler licensing requirements specifically pertain to prescription drugs. Under Kentucky law a “prescription drug” is any “drug” required by federal law to be labeled “Caution, federal law prohibits dispensing without a prescription.” It also includes any “drug” required to be labeled “Rx Only” or “Rx” or which is “to be dispensed only pursuant to a prescription drug order or is restricted to use by practitioners.”
Looking back at a prescription device, it is an “article intended to affect the structure or function of the body of man” and it is labeled either Rx Only or is restricted to dispensing pursuant to prescription to use by a practitioner, right? The Kentucky Board of Pharmacy has, in fact, interpreted the above provisions in determining that a device manufacturer or distributor does require a license notwithstanding the fact that the word “device” is not used in any of the applicable statutes or regulations that support that determination.
Other states have similar requirements. A device manufacturer or distributor that ships its own product requires just under 20 state licenses whereas a device manufacturer that utilizes a 3PL requires just under 15 state licenses. As prosecutors and regulators turn their attention to the device industry, state licensing is just one of many areas that device companies may need to address.