Prescription Medical Device Manufacturers, Distributors, and the NABP: The role in state licensing

This article is the second in our new thought leadership series on the critical and continually evolving state regulatory concerns facing medical device manufacturers. Part one of the series examined complex licensing challenges that set devices apart from drugs. The third article will delve into the enforcement mechanisms and penalties for operating without the proper state licenses, underscoring the growing legal risks associated with non-compliance. Last, we will provide compliance solutions that manufacturers can adopt to avoid or mitigate those penalties. For more information about state medical device licensing and compliance generally, please see our other articles on these topics, available online here.

How the NABP Impacts State Licensing Requirements for Medical Device Companies

The NABP is a professional organization that supports boards of pharmacy in each state, the District of Columbia, and several territories. Its mission is to help protect public health by promoting safe and effective distribution and handling of drugs and certain medical devices.

State licensing requirements for medical device manufacturers and distributors vary by state, and states often use the NABP’s guidelines as a basis for regulatory standards. A company’s decision whether to obtain a state license requires a nuanced analysis, based on the unique business model of that company, and detailed understanding of state regulations and enforcement practices. If a required, the licensing process may involve direct application to the state board of pharmacy, passing an NABP or state inspection, and meeting additional standards depending on the characteristics of the medical device.

1. State-Specific Licensing Processes

• Direct Licensing by State Boards of Pharmacy: The NABP advises state pharmacy boards on licensing best practices, which can influence the licensing of medical device distributors, especially for those involved in devices that contain or administer drugs (e.g., drug infusion pumps, drug-eluting stents). All states regulate drug manufacturing and distribution. In contrast, only certain states require manufacturers and distributors of prescription medical devices to obtain a license. Companies should identify whether a license is required in all jurisdictions in which the company’s products enter the stream of commerce.

• Reciprocity with NABP Accreditation: The NABP’s guidance on handling, storage, and distribution often informs state regulations that apply to devices. States such as Indianna, Maryland, North Dakota, and Wyoming require NABP accreditation as a qualifier in the state licensing process. Additionally, NABP accreditation may expedite the licensing process in other states by demonstrating that a company has already met recognized standards.

2. Inspection Standards and Compliance

• Onsite and Remote Inspections: Certain states utilize the NABP to conduct inspections during the licensure process for medical device companies. Offering onsite and remote inspections, the NABP observes compliance with storage, quality control, and distribution standards. State Boards of Pharmacy frequently rely on these inspections, incorporating the results into licensing and renewal determinations. For instance, distributors handling temperature-sensitive devices or drug-infusing devices may need to pass NABP inspection criteria regarding cold chain storage and environmental controls.
• Adverse Event Reporting and Recalls: NABP’s influence also extends into safety and recall processes. States may require distributors to follow specific reporting guidelines that NABP has established to handle adverse events and recalls efficiently.

3. Accreditation and Reporting Programs

• NABP Accreditation: NABP’s Drug Distributor Accreditation, formerly known as the Verified-Accredited Wholesale Distributors (VAWD) program is available for companies that store, handle, and ship prescription drugs and devices in the supply chain. While not required by all states, this accreditation ensures distributors meet high standards in areas such as storage, shipping, security, and tracking—elements critical to medical device distributors. NABP’s accreditation programs provide a standardized approach to compliance, giving state boards confidence in the reliability and regulatory adherence of accredited companies. Companies operating in multiple states may benefit from accreditation reciprocity, making it easier to obtain licenses without duplicate compliance checks.

• Clearinghouse Use in Licensing Decisions: NABP’s Clearinghouse provides a national database of disciplinary and administrative actions across states, allowing state boards of pharmacy to check whether manufacturers or distributors have faced penalties in other jurisdictions. This centralized record helps states ensure they are protecting the public by licensing companies with a consistent track record of compliance.

Consequences of Non-Compliance with State-Licensing Requirements

Failing to obtain required state licenses or NABP accreditation (when needed) can expose medical device manufacturers and distributors to significant penalties, which may include:

1. Substantial Financial Penalties: States may impose civil penalties and fines for companies operating without required licenses, which are often determined by the severity of the offense and length of time without licensure. While some states issue fines on a “per facility” basis, companies should be aware that there is a potential to be fined for each individual sale or distribution of a device made while unlicensed. /li>
2. Revocation of Operational Privileges: Without proper licensing, companies may be subject to cease-and-desist orders that halt all distribution or manufacturing operations in a given state. Additionally, non-compliance with NABP accreditation programs may bar distributors from states that mandate these certifications.
3. Disciplinary Actions Across States: Due to NABP’s Clearinghouse, a disciplinary action in one state can quickly alert other states, leading to cascading penalties and further license suspensions or denials. This can significantly hinder a company’s ability to do business on a national level.
4. Criminal Liability for Repeated Violations: States may pursue criminal charges in cases where companies intentionally bypass licensing laws, especially in serious cases where patient safety is compromised. This risk is higher in cases involving devices that store or administer medications.
5. Reputational Damage: Failure to comply with license and accreditation requirements can damage a company's reputation, impacting relationships with healthcare providers, regulatory bodies, and other stakeholders. Providers and partners may hesitate to work with companies perceived as non-compliant, leading to lost revenue and reduced market opportunities.

Compliance Strategies for Manufacturers and Distributors

To comply with NABP-influenced licensing requirements and state regulations, prescription medical device manufacturers and distributors should implement robust compliance strategies:

1. Obtain NABP Accreditation When Applicable: For companies distributing devices in multiple states, the Drug Distributor Accreditation can streamline licensing, enhance reputability, and simplify compliance with state regulations. However, companies should only obtain the required licenses and accreditation, reducing the burden of complying with unnecessary regulatory requirements.
2. Monitor Licensing and Regulatory Updates: State licensing statutes and enforcement practices may change at any time. Similarly, NABP program standards can evolve. Staying informed regarding regulatory changes helps companies maintain continuous compliance and anticipate new requirements. A formal process to periodically audit licensing status and NABP-related accreditation requirements across states can help companies identify gaps and reduce risks of non-compliance.
3. Build Relationships with State Boards and the NABP: Open communication with state boards of pharmacy and the NABP can help companies clarify licensing requirements, address potential compliance issues proactively, and maintain good standing with regulators. Utilizing legal counsel with an established history of working with both medical device companies and regulatory agencies can help companies navigate state licensing issues and enforcement proceedings.
4. Implement Robust Compliance Programs: Maintaining a formal compliance program, incorporating both NABP standards and state-specific requirements, ensures that staff and facilities are meeting regulatory expectations consistently.

Conclusion

For prescription medical device manufacturers and distributors, understanding NABP-related standards and state licensing requirements are integral to maintaining regulatory compliance and ensuring patient safety. Companies should build in extra time to work through any NABP and state-specific requirements when formulating their business and distribution plan. Working with an experienced legal team can help companies communicate with the NABP and state licensing boards, while taking advantage of strategic insights and avoiding unnecessary regulatory oversight.

If you have any questions about state licensing requirements or navigating NABP accreditation, please contact any of the authors of this article or the Hogan Lovells lawyer with whom you usually work.

Authored by Jodi Scott, Wil Henderson, Greg Kass, Lauren Massie, and Hannah Wailes.