California Board of Pharmacy Changes

Over the last few months the California Board of Pharmacy has been busy considering several changes to its current rules and how it regulates various entities under its purview. Late last month the Board opted to move forward with two notable regulatory changes: one that updates how the Board licenses and tracks beneficial interest changes for pharmacies controlled by trusts, and one that introduces new reporting requirements for Board applicants and licensees. Further detail on each update can be found below.

Pharmacies Controlled by Trusts

The Board adopted additional language within 16 CCR § 1709 that allows for entities with a beneficial interest controlled by a trust to be licensed as a pharmacy in the state. This change is in contrast with the Board’s historical stance—as indicated in its published Initial Statement of Reasons justifying the change, the Board notes that “[p]reviously, pharmacy law did not recognize a ‘trust’ as a person to whom the board was authorized to issue a license. This prevented the board from issuing a pharmacy license when the ownership structure of the pharmacy included a trust, as occurs in many current estate plans.”

Now, the Board makes clear that such an entity can indeed receive a pharmacy license and/or maintain a license if its ownership structure changes to include a trust. However, there are numerous additional disclosures that must be made for these entities. A full list is provided below:

(d) If any beneficial interest of a business entity licensed by the board is held in trust, the applicant, licensee, or any person with management or control of the business entity shall do the following:

(1) In addition to the requirements in subdivision (a), as part of their application and renewal, report the name of any other person in any position with management or control of the business entity;

(2) As part of the application, disclose the full name of the trust, and provide to the board a complete copy of, and any amendments to, the trust document. A trust document and any related amendments shall be considered confidential financial documents by the board;

(3) As part of annual renewal, provide to the board a complete copy of any amendments to the trust document made after submission of the original application;

(4) Include in the application and annual renewal the name, address, phone number, and any email address for each grantor, settlor, trustee, and/or trust protector, as applicable;

(5) Include in the application and annual renewal the name, address, phone number, and any email address for each named beneficiary of the trust who is age 18 or older. Where the beneficiary is under age 18, the guardian of the beneficiary(ies) shall be identified.

16 CCR § 1709(d)(1-5).

The entity would also be responsible for notifying the Board within 30 days of various types of changes to the trust, including but not limited to revocation, dissolution, and amendments to the trust. 16 CCR § 1709(d)(6).

While the updated rule opens up new possibilities for pharmacy ownership in California, entities should note that the requirements are stringent and could be burdensome. For example, the entire trust document must be submitted regardless of relevance, a requirement that despite pushback during the public comment period, the Board kept in the Final Rule. Keeping track of reportable changes may also be difficult within the 30-day period required by the Board, especially if there are not clear lines of communication between those controlling the trust and pharmacy leadership.

The updates to 16 CCR § 1709 are effective April 1, 2022.

Applicant/Licensee Email Address Reporting

The Board also recently adopted new language within 16 CCR § 1704 that will require all applicants and Board licensees to provide their email address to the Board and notify the Board of any changes. Full text of the additional language is below:

Each applicant or person holding a certificate, license, permit, registration or exemption to practice who has an electronic mail address shall provide to the Board that electronic mail address and shall maintain a current electronic mail address, if any, with the Board and shall within 30 days notify the Board of any change of electronic mail address, giving both the old and new electronic mail address.

16 CCR § 1704(b).

The Board states that “[b]y requiring applicants and licensees to provide and maintain their electronic mail address with the board, the board can email application deficiency notices, renewal notices, and renewal deficiency notices to applicants and licensees. This will eliminate postal delays and reduce the possibility of notices being lost in the mail or misdelivered.” The Board also points out that most applicants or persons renewing their licenses report their email address already (although it has not previously been required). Finally, the Board states that an applicant or person without an email address need not create one and report it to the Board.

Overall, the new requirement has broad applicability and appears to apply to all entities and persons regulated by the Board. It also signals the Board’s desire to further increase communication by email and avoid delivery problems inherent with mailing important documentation and notices. At this stage, it is unclear if the Board will proactively collect email addresses for current licensees for entities/individuals who did not previously report one. The change becomes effective on April 1, 2022. However, in the meantime, licensees should review their current registrations and utilize the Board’s Online Change of Address Form to report any email address updates to avoid potential future licensure issues.

For more information about how California’s new Board rules may affect your business, please contact your Quarles & Brady attorney or:

• Simone Colgan Dunlap: (602) 229-5510 / simone.colgandunlap@quarles.com
• Michael French: (312) 715-5261 / michael.french@quarles.com