By Frank Fazio and Heather M. Przyhocki
Pharmaceutical and device manufacturers are in a constant state of flux. Companies are bought and sold and officers change. Corporate offices move into bigger and better office space, or a contact individual or designated representative leaves the company. What pharmaceutical and device companies must understand is that all of these changes must be reported to the state licensing agencies in which licenses are held at or about the time the change occurs.
State distribution licenses are non-transferable. They are both owner and address specific. Hence, a change in ownership or location require new applications to be prepared and submitted. Applications mandated by changes in ownership or location are the same as initial applications and completing them is a burdensome, time-consuming process. The time limitations that apply to notifications related to such changes are extremely tight. Although the timeframe to submit the change notification is short, the turnaround at the state level is not. While a company can fully move over a weekend, it will take the states much longer to process the application and issue an updated license reflecting the new address.
The acquisition of a company clearly triggers change of ownership notification obligations. However, there are many other situations that may be considered a change of ownership for notification purposes. A private company going public, a public company going private, or reorganizations of a parent and subsidiary to sister corporations are all events that may trigger change of ownership notification obligations. Likewise, a change in corporate structure from a limited liability company to an incorporated entity may also trigger these obligations.
Most states require notification of changes in name, ownership, corporate officers, location, and/or designated representative within seven to thirty days. While some states impose more stringent requirements. For example, Georgia requires manufacturers and wholesalers to report any changes to the Board of Pharmacy prior to the change. As per Georgia regulations, § 480-7-.03. Drug Wholesale Distribution Licensing Requirement: “(c) Licenses become null and void upon the sale, transfer or change of mode of operation or location of the business . . . (e) Changes in any information in this section shall be submitted to the Board prior to such change.” In addition, most state licensing agencies require immediate notification of any disciplinary actions. This can be problematic in the event of a merger or acquisition between publicly traded companies.
Some states require more than written notification when a company undergoes a significant change. For example, when a company changes its corporate officers, certain states require a company to complete either a change in officers form and/or submit a background check/fingerprint cards for the new corporate officer(s). Since background checks can take at least 4-6 months to process, it is crucial that companies stay proactive and are aware of these filing requirements. To this end, notification timelines should be included in the planning process for such significant changes. Further, corporate counsel should involve those in charge of state licensing when planning any significant corporate events. If you have not been reporting these changes, then your company may not be compliant with state licensing requirements.