Senate Bill S4592

                                 BILL NUMBER:  S4592

 TITLE OF BILL :
An act to amend the education law, in relation to penalties for
counterfeit drugs

 PURPOSE :
To protect the public by establishing a system that will help ensure
that drugs that enter the market and are purchased by consumers will
be unadulterated by counterfeiters.

 SUMMARY OF PROVISIONS :
Section one amends section 6802 of the education law by adding a new
subdivision 23 which defines the word pedigree.

Section two amends subparagraph 2 of paragraph a of subdivision 4 of
section 6808 of the education law, as amended by chapter 62 of the
laws of 1989, by increasing the application fee that shall accompany
the registration for a wholesaler or manufacturer to one thousand two
hundred dollars from the current eight hundred twenty-five dollars.

Section three amends paragraphs band d of subdivision 4 of section
6808 of the education law, paragraph b as amended by chapter 538 of
the laws of2001 and paragraph d as amended by chapter 62 of the laws
of 1989. Paragraph b is amended by providing that the triennial
registration fee that is paid by wholesalers and manufacturers shall
              

be increased to eight hundred dollars, from five hundred dollars, or a
pro rated portion as determined by the department.  Paragraph d
provides that in the event that the location of a business changes,
the fee for inspection and endorsement shall be increased to three
hundred dollars from the current one hundred seventy dollars.

Section four amends subdivision 4 of section 6808 of the education law
by adding six new paragraphs e, f, g, h, i and j. Paragraph e provides
that any applicant for registration as a wholesaler or manufacturer
shall be of good moral character, as determined by the department of
education. Such requirements shall extend to all persons responsible
for the distribution of a prescription drug for the applicant as
determined by the department. Paragraph f provides that upon receipt
of a registration, the commissioner shall initiate a criminal history
records search of any of the persons identified in paragraph e. Prior
to conducting the criminal history records search and fingerprinting
process, the commissioner shall obtain permission from the applicant.
The commissioner shall obtain two sets of fingerprints from each
applicant and any fees necessary to process such fingerprints. The
commissioner shall promptly transmit the fingerprints to the division
of criminal justice services who shall submit the fingerprints to the
federal bureau of investigation for a national criminal history record
check.  Such criminal history record will be considered for the
purpose of establishing good moral character. "Criminal history
record" is defined. All such criminal history records shall be
confidential. The commissioner is authorized to charge the applicant
additional fees for the criminal history record search. Paragraph g
provides additional duties of the commissioner and the department,
such as promulgating a form to be provided to all applicants for
registration purposes. The department shall obtain the signed,
informed consent of each applicant with regard to obtaining and
reviewing the applicant's criminal history record. Specifics of such
consent form are outlined.  Paragraph h provides that every wholesaler
shall submit a performance or surety bond of not less than one hundred
thousand dollars to the department to ensure compliance with the
provisions of this article.  The department may waive such bond for
certain not-for-profit entities or other certain wholesalers.
Paragraph I provides that the department may promulgate rules and
regulations to exempt from the requirements of paragraphs e, f, g and
h a wholesale r that has received accreditation body approved by the
commissioner and that meets the licensing standards under this
subdivision.  Paragraph j provides that the commissioner shall exempt
certain manufacturers from certain requirements in the event that such
requirements are not required by federal law or regulation, unless the
commissioner determines that such requirements are necessary to
prevent a risk to prescription drug distribution in the state.

Section five amends the education law by adding a new section 681 O-a
and provides certain acts which shall be considered unlawful if
committed by a manufacturer, wholesaler or other person.  Such acts
include intentionally packaging, selling, transferring, distributing
or delivering any prescription drug that he or she knows to be
adulterated, misbranded, counterfeit or has been rendered unfit for
distribution. It shall be a class D felony to violate this section.
Additionally, any adulterated, misbranded, counterfeit, or unfit drugs
may be subject to seizure.

Section six amends the education law by adding a new section 681 O-b
which provides that every manufacturer shall establish and maintain a
pedigree for each prescription drug, and every wholesaler, pharmacy or
other person who furnishes or dispenses a prescription drug shall
maintain a pedigree for each prescription drug. A pedigree shall be in
a form and contain information as determined by the department of
education (SED). Minimal information that shall be included is
outlined.

Every pedigree shall be maintained for a period of three years, or a
reasonable period of time as determined by the commissioner of
education and shall be made available for inspection by SED.  A
pedigree shall be maintained in an electronic pedigree tracking system
or other acceptable format beginning January 1, 2011. One year
extensions may be issued by SED in order to comply. Feasibility of a
format shall be determined by SED. Certain outlined criteria shall be
considered in determining the feasibility of any format used. Any
person who violates any provision of this Section shall be subject to
a fine.

Section seven amends section 6824 of the education law, as added by
chapter 987 of the laws of 1971, by adding a violation of any
provision of section sixty-eight hundred ten-a of this article to the
list of violations for which the secretary is authorized to apply to a
court for injunction.

Section eight provides the effective date.

 JUSTIFICATION :
The marketing of counterfeit drugs has become prevalent throughout the
United States as well as around the world. The World Health
Organization (WHO) estimates that counterfeit drugs make up 10% of all
drugs sold worldwide, with the percentage much higher in developing
countries. January 2009 Report by the American Council on Science and
Health, "Counterfeit Drugs: Coming to a Pharmacy Near You with an
Update for 2009" (ACSH 2009 Report). The counterfeit drug industry's
sales are estimated to be $39 billion or 11 % of global pharmaceutical
commerce, and expected to climb to $75 billion by 201 O. Peter Pitts,
"Counterfeit Drug Sales to Reach &75 Billion by 2010, Report Says,"
The Heartland Institute, November 1, 2005. Moreover, counterfeit drugs
have contributed to the increasing drug resistance of the most deadly
infectious diseases such as HIV/AIDS, tuberculosis and malaria.

Despite the view that the U.S. drug supply is among the most secure in
the world, the growing size and sophistication of counterfeit drugs
rings have allowed them to penetrate the legitimate drug supplies of
the United States. In the last five years, counterfeit drug
investigations by the Office of Criminal Investigations of the Food

and Drug Administration (FDA) have increased almost ten-fold, from 6
in 2000 to 59 in 2004.

There is, however, no way to know the true degree to which counterfeit
drugs have contaminated our drug supply. Most of the incidents go
undetected since the evidence is usually destroyed when the drug is
consumed and the results of taking the counterfeit drug are blamed on
other causes, such as incorrect diagnosis, or in the case of HIV /
AIDS further complications and death are expected. Even if we accept
the FDA's estimate that 1% or less of all drugs sold in the U.S.  are
counterfeit (compared to a WHO estimate of 5% to 7%), the odds are 1
in 100 that the drug a consumer receives at a pharmacy in the U.S.  is
counterfeit and that out of the 4 billion prescriptions filled in the
U.S. last year, as many as 40 million may have been filled with
counterfeit versions. We have recently experienced two highly
publicized examples of counterfeit drugs: Lipitor tablets used to
lower cholesterol, where in New York State alone, in 2005 New Yorkers
received an estimated 100,000 dosage units of counterfeit Lipitor; and
Procrit, an injectable drug used to stimulate red blood cell growth to
treat sever anemia and anemia related to treatment for HIV/AIDS.
Counterfeits of other well-known brands as well as drugs used to treat
critically-ill patients were found distributed in U.S.  in the last
few years to hundreds of thousands of unwitting patients, including:

* Combivir, used to prolong the life of HIV/AIDS patients by
preventing the virus from reproducing--replaced with another HIV
medication that can cause fatal allergic reactions

* Serostim, a human growth hormone used to prevent HIV/AIDS patients
from wasting-replaced with dangerous levels of a fertility drug *
Celebrex, used to treat arthritis--replaced with vitamins

* Viagra, used to treat impotence--over 700,000 counterfeit pills were
manufactured

* Zyprexa, used to help prevent hallucinations and delusions in
schizophrenic and bipolar patients--replaced with aspirin

* Neupogen, an injectable used to boost the immune system of cancer
patients-replaced with saline.

ACSH 2009 Report. In addition, there have been multiple incidents
involving counterfeit versions of Tamiflu, used to treat seasonal or
avian flu. Aside from the obvious direct result of receiving the
counterfeit medicine, treatment from counterfeit versions may also
increase the risk of causing the virus to develop a resistance to the
Tamiflu drug.

The nature of the drug supply system in the U.S. makes our drugs ripe
for diversion and counterfeiting. The path of a drug from manufacturer
to distributor to pharmacy more often than not is not a single or
linear one; in fact, a substantial portion of our drugs flow through a
complex network of distributors, intermediaries and secondary
wholesalers. When wholesale distributors buy drugs without knowing all
the previous owners of the product, the integrity of the product
cannot be assured. This was the case for Long Island youth Timothy
Fagan, who was only 16 years old when he took a single vial of what he
thought was Epogen, a medication to increase red blood cells, to help
him recover from a liver transplant. However, at some point in the
distribution of the drug from manufacturer to pharmacy the drug had
been tampered with and the drug was a counterfeit.  Timothy suffered
through several months of excruciating pain before his physicians
discovered that he had received a counterfeit medication and is now
forced to take medication for the rest of his life.


Although a federal law, the Prescription Drug Manufacturing Act (PDMA)
was enacted more than 20 years ago to assure the safe and effective
distribution of prescription drugs and to minimize the risks to
consumers from taking counterfeit or adulterated drugs by, among other
things, imposing a requirement on wholesale distributors to maintain
either a paper or electronic pedigree of prescription drugs, the FDA
delayed the effective date for implementing the regulations relating
to the pedigree requirements until December 1, 2006. At the request of
a group of secondary wholesalers, the federal district court for the
eastern district of New York in December stayed the effective date of
certain of the pedigree requirements.

To better secure the drug supply system pending implementation of
federal law, we must adopt at the state level a multi-layered strategy
that combines establishing pedigree requirements in the context of the
developing anti-counterfeit technology, strengthening the licensing
requirements of wholesalers and increasing penalties for those who
violate the law so that our regulatory and enforcement agencies have
the authority to carry out the law.

Three states, Idaho, North Dakota and South Dakota, signed into law
legislation that tightens licensure requirements of wholesalers and
establish pedigree requirements for prescription drugs, requiring
their respective boards of pharmacies to set a target date for
implementation of electronic pedigree technology to track prescription
drugs through the supply chain. In addition, nineteen states including
California, have enacted laws or regulations establishing pedigree
requirements. The Food and Drug Administration Amendments Act of 2007
includes a provision that requires the development of a standardized
numerical identifier be applied to a prescription drug at the point of
manufacturing and repacking at the package or pallet level, sufficient
to facilitate the identification, validation, authentication and
tracking and tracing of the prescription drug.

It is the intent that requiring electronic pedigree, with lot-level
information as is available today, will provide a near-term solution
to further secure the pharmaceutical supply chain and help enhance
patient safety. It should be noted that to the extent that a
wholesaler, retail pharmacy or other person furnishing, administering
or dispensing a prescription drug does not currently have the
capability to maintain lot level information, the legislature does not
intend that such person be required to expend funds at this time to
acquire technology specifically to maintain lot-level information.

It is the further intent that a standardized numerical identifier,
when available, in combination with electronic pedigree, will allow us
at that time to track and trace the movement of prescription drugs
throughout the entire distribution system, from manufacturer, to
wholesaler, to retail pharmacy or other person furnishing,
administering or dispensing a prescription drug. In order to track
prescription drugs all the way through the system to the retail
pharmacy, it is important that the format use technology that includes
each product's standardized numerical identifier' that allows the
tracking to occur at the retail level. It is acknowledged that the
technology that would allow us to track the movement of prescription
drugs throughout the distribution system is currently being developed
in the industry. To ensure that the technology format required by this
bill accomplishes the intent of the legislation, it is important that
the format be determined to be acceptable by SED.  In order for the
technology format to be determined "feasible," it is critical that the
format use state of the art technology, readily available with respect
to all prescription drugs, be compatible with, and provide information
that can be read by, the format that is standardized, nonproprietary,
and widely available and used by manufacturers, wholesalers and
retailers, including chain and independent pharmacies and hospital
pharmacies, and that it be interoperable among all members in the
distribution system.  While the format that is currently being
developed is sometimes referred to as "track and trace," the
legislature recognizes that the format that is ultimately determined
to be "feasible" as provided in the bill may be referred to as
something different than a "track and trace" system or may be a
different format.

The legislature further acknowledges that the FDA is in the process of
developing standards for identifying, validating, tracking and
tracing, and authentication for prescription drugs, particularly a
standardized numerical identifier to be applied to a prescription drug
at the package level. The bill recognized that in determining the
feasibility of the format, the format must at minimum be consistent
with federal standards for a standardized numerical identifier. In its
January 2009 Guidance for Industry, "Standards for Securing the Drug
Supply Chain Standardized Numerical Identification for Prescription
Drug Packages," the FDA provided guidance for standards for
prescription drug standardized numerical identifiers at the package
level. For that purpose, the FDA considers the package to be "the
smallest saleable unit placed into interstate commerce by the
manufacturer or the repackager for sale to the pharmacy or other
dispenser of the drug product." The industry continues its efforts to
develop a format that will meet the, needs of all members in the
distribution system as well as the standards for the technology to
identify, validate, track and trace, and authenticate prescription
drugs through the entire distribution system.

Use of an electronic pedigree tracking system by all parties in the
pharmaceutical supply chain, beginning with the manufacturer, would be
required in 2011, provided that the SED has determined that the system
then available is feasible at that time. Pending determination by SED
that the electronic pedigree tracking system or other technology
format is feasible, the bill does not require the acquisition or
adoption by any member of the distribution system (namely,
manufacturers, wholesalers and retailers, including chain and
independent pharmacies and hospital pharmacies, and other persons
furnishing, administering or dispensing a prescription drug) of any
interim technology to comply with the electronic pedigree requirements
of the bill.  Rather, the intent of the bill is to require that
members of the distribution system utilize the technologies they
currently utilize (or intend to utilize regardless of the enactment of
this legislation) in conducting their businesses in accordance with
business practice and federal and state laws in effect in order to
meet the electronic pedigree requirements set forth in this
legislation.

This bill will establish a system to help ensure that drugs that enter
the market and purchased by consumers will be unadulterated by
counterfeiters. By strengthening the licensing requirements of
manufacturers and wholesalers by, among other things, carrying out
criminal background checks and requiring surety bonds, as well as by
establishing a system for electronic pedigrees and establishing
criminal penalties for violations of this article, we will better
ensure that the drugs we purchase will be safe. Since the bill
provides that all manufacturers establish and maintain an electronic
pedigree for each prescription drug, and all wholesalers, pharmacies
and other persons furnishing, administering or dispensing a
prescription drug maintain an electronic pedigree for each
prescription drug, the bill will avoid facing the same legal challenge
by secondary wholesalers that the FDA faced in the federal district
court.

Without enacting legislation at the state level to address the
weaknesses inherent in our drug supply system, we will continue to
leave the public vulnerable to individuals who are willing to harm,
and even kill, people for profit.
 LEGISLATIVE HISTORY :
2008 and 2007, A.7810-C referred to higher education; same as S.5290-C
referred to health. 2006 and 2005, A.2957-B referred to higher
education; same as S.3278-A, referred to higher education (passed
Senate in 2005).

 FISCAL IMPLICATIONS :
None to the state.

 EFFECTIVE DATE :
On the one hundred and eightieth day after it shall become law.