Best Laid Plans: 3 Obstacles to Prepare for in Your State Licensing Strategy

As the pandemic creates unique working and regulatory situations from state to state, manufacturers must prioritize their state licensing strategy to ensure that the applications or approval windows don’t cause delays in their launch.

Some of these requirements can involve a 12- to 18-month process, which is why it’s important to plan and start your strategy early. But even the best-laid plans can run into obstacles. Below are three obstacles that can arise in the state licensing process, and advice for navigating them.

1. All members of the manufacturing/supply chain must hold their own licenses.

Typically, the virtual manufacturer (NDA/BLA holder or brand) that is selling the product, organizing operations, and sourcing partners from across the world would be the only party that needed to hold a state license. But over the last few years, states have started to require that contracted manufacturing organizations (CMOs), including API suppliers and packagers, also hold licenses in states they are operating in before the brand can apply for their license.

This is a new trend and has been catching even experienced CMOs and licensing professionals by surprise. In the past two years, this requirement has gone from existing in one to two states to six to seven states, and it continues to increase.

Manufacturers that skip this step in their state licensing plan risk signing agreements with CMOs and other supply chain partners who aren’t carrying the necessary licenses. This causes a delay as they then need to wait for the CMO to obtain the license before they can apply for their own. Check the compliance of all your partners before selecting and signing agreements with them.

2. State licensing has dynamic requirements and is always changing year to year.

CMO licensing is just one example of the ever-changing requirements impacting manufacturers. In at least seven states, manufacturers also need FDA approval before they can apply for state licensing. This significantly impacts the timeline because it’s bringing the federal government into the process. In at least eight states, at least one officer from the virtual manufacturer needs to pass an FBI criminal background check and/or submit fingerprints for processing.

In some instances, the virtual manufacturer can piggyback off of the licenses of their third-party logistics partners, but in at least 35 states, they still need their own license. This latter group of states has increased by about 20% in the last five years and continues to grow. Even if your licensing plan is up to date right now, a few years from now you or your partners could be out of compliance because of the rate at which states change or add requirements.

These dynamic changes are complex, and it’s important to have someone on your team who can be in the weeds and communicating regularly with the states. It’s not enough to simply research the requirements in each state as you create your plan. Boards of pharmacy in most states aren’t creating laws, which means they aren’t communicating new requirements as broadly and thoroughly as we might like—and they can change their requirements without giving advance notice. For this reason, it’s wise to have an outside counsel who has relationships in the different states and can keep a pulse on upcoming changes.

One additional note: It’s not just changes with the pharmacy boards that can disrupt your plan. During the process, if there is any change in your company’s leadership, funding, location, or anything else that goes on the application, you will have to start the process over, as the application is now incorrect and therefore invalid.

3. State application review times vary, which can extend the process to 12-18 months.

If there’s one main takeaway about state licensing, it’s this: It cannot be a last-minute part of the launch process. Because review times can vary, and sometimes involve thorough inspections with federal and/or state agencies, state licensing needs to be approached as a strategic and early investment.

The entire process can take up to 12-18 months, so starting early is of the utmost importance. Manufacturers need to understand all the complex prerequisites and have a strategy—with wiggle room—before they start applying or risk spending hundreds of thousands of dollars to figure out workarounds.

A Note on COVID-19

Because everything in our country is affected by the pandemic, it’s important to address its impact on the licensing process. There are already no posted approval times for a license—the states have always worked at their own pace—but because of delays in shipping, impacts to staff capacities, and government backlog, manufacturers should expect to plan for additional delays in receiving all approvals.

  • Ryan Fields

    Ryan Fields is the Vice President of PharmaLicense at Two Labs, a pharma services company based in Columbus, Ohio. He has a total of 18 years of pharma and medical device commercial experience. As the head of Two Labs’ State Licensing service since 2017, he leads a team of 15 full time licensing experts and has helped launch more than 150 products.


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