In a highly regulated industry, such as controlled substance distribution, having clarity of regulatory requirements facilitates implementation and execution of an effective compliance program. Uncertainty on expectations from regulators and/or significant “grey area” in compliance requirements present additional risk for companies and may adversely impact the public’s access to medication for legitimate medical purposes. There are few things that can make managing a controlled substance compliance program more difficult. A state legislature that passes legislation imposing requirements that directly contradict and undermine the requirements and expectations of the Drug Enforcement Administration (DEA) is high on that list.    

Which brings us to Arkansas.

SB274 was filed on February 15, 2023, in the Arkansas Senate.  The title of the legislation says all you need to know:

To Restrict Wholesale Distributors of Controlled Substances and Legend Drugs from Limiting or Terminating Sales of Controlled Substances to Certain Licensed Professionals; and to Declare an Emergency

Okay, so maybe not all you need to know. 

In order for a distributor to limit or terminate controlled substance distributions to a “provider or pharmacy,” SB274 requires one of the following four exceptions be met:

• If the distributor “suspects purchasing or dispensing behavior that is an aberration…” the distributor must file a formal, written complaint with the state licensing board and wait for adjudication of the complaint by the board;
• The provider or pharmacy can voluntarily terminate the relationship but must provide the distributor with 120-day notice;
• The distributor can voluntarily terminate the relationship with the provider or pharmacy, if 120-day notice is provided; or
•  Suspicious orders reported to the Arkansas Board of Pharmacy are exempt from the general prohibition from limiting or terminating controlled substance distributions; however, suspicious orders cannot be used as a basis for terminating the distribution relationship.

The legislation appears to be in response to recent actions taken by one or more distributors and as a consequence of the Opioid MDL settlement. It should come as no surprise that pharmacies and patients will be adversely impacted by the Opioid MDL settlement reached with the “Big 3” and future settlements with the remaining defendants. Most states, however, signed onto the terms of the settlement with the knowledge and understanding of the potential consequences. This includes Arkansas. 

SB274, while well-intentioned, creates significant challenges for distributors and their ability to meet DEA’s expectations. I understand the hardship for pharmacies who lose their distribution partner(s); however, the Opioid MDL and enforcement actions by DEA have significantly altered the risk tolerance of DEA registrants. Billion-dollar settlements and enforcement actions based solely on red flags and not actual diversion are difficult for compliance teams and corporate executives to ignore. Becoming more conservative when making compliance decisions is rational and reasonable.

Instead of arbitrarily restricting the authority of distributors to manage their compliance programs through risk-based decisions, public policy initiatives should focus on providing a universal standard and greater clarity on compliance expectations and increased collaboration between regulated industry and its regulator.