What is a third-party logistics provider or 3PL?
A third-party logistics provider, or 3PL, is an entity that provides or coordinates warehousing or other logistics services on behalf of a pharmaceutical manufacturer, wholesale distributor, or dispenser of a product. This can include obtaining raw materials for drug manufacturing, operating a storage facility that houses a distributor’s product, transporting pharmaceuticals, or handling all these services.
A 3PL provider does not take ownership of any product. Neither do they have the responsibility to direct the sale or disposition of the product.
If you operate a 3PL business, there are important legal requirements that you must satisfy.
What are third-party logistics (3PL) licensing requirements?
United States law requires a wholesale 3PL provider to be licensed in the state in which it does business. If you transport drugs between states, you must be licensed in each state in which you operate.
Some states have specific license requirements for 3PLs. For example, in Florida, 3PLs must obtain a third-party logistics provider license from the Division of Drugs, Devices, and Cosmetics. Other states where a 3PL license is not needed may require the business to become licensed as a wholesale drug distributor or other entity.
The department that administers licenses varies by state. If the state in which you do business does not have a 3PL license requirement, you may still be required to make periodic reports to the Food and Drug Administration.
Applying for the appropriate license in each required state can be complicated and time-consuming. You will need to provide samples of contracts, a customer list, names of the states in which you operate, and proof of general liability insurance. If you maintain a brick-and-mortar facility, you may be subject to state inspection of the facility.
Application fees for a 3PL license can range from several hundred to several thousand dollars. The approval process can take between one to three months depending on the licensing division in the state in which you are applying.
What licensing authorities apply to 3PLs?
Depending on the nature of the goods being moved, many different licensing authorities apply to 3PLs — at the federal, state, and local levels. These regulatory bodies have a vested interest in ensuring product safety and enforcing regulations through 3PL licenses.
For example, if you transport shipments containing certain hazardous materials you must register with the federal Hazardous Materials Safety Registration Program. If you are a freight forwarder and move cargo via sea and air, you must obtain a federal Ocean Transportation Intermediary License and an Indirect Air Carrier License. If you serve as a customs broker, you must also be licensed at the federal level.
In addition to obtaining a license in each state where your 3PL business operates, there may be other licensing requirements that you must comply with.
For instance, the U.S. Food and Drug Administration (FDA) requires 3PLs to file an annual report of every state in which the business operates, its applicable license numbers and expiration dates, and records of any disciplinary actions it incurred that year.
Furthermore, the Drug Supply Chain Security Act (DSCSA) also affects 3PLs and drug wholesalers. It directs the FDA to establish national licensure standards for wholesale distributors and 3PL providers and requires these entities to report licensure and other information annually to the FDA.
The Drug Supply Chain Security Act: Update
The Drug Supply Chain Security Act (DSCSA), which was signed into law in 2013, outlines requirements to develop and enhance drug supply chain security over the next 10 years.
In February 2022, the FDA announced a proposed rule (National Standards for the Licensure of Wholesale Drug Distributors and Third-Party Logistics Providers) intended to provide greater assurance that the wholesale drug supply chain is vetted and qualified to distribute prescription drugs.
The proposal includes the replacement of the current 21 Code of Federal Regulations, Part 205, which includes guidelines for state licensing of wholesale prescription drug distributors. When finalized, the new Part 205, will implement the DSCSA licensure requirements and provide oversight of licensure of wholesale drug distributors and 3PL providers.
These requirements include the following:
- Licensure application requirements.
- Procedures surrounding pre-licensure inspection as well as denial, revocation, and suspension of licenses.
- Establishment of standards for the storage and handling of prescription drugs, including facility requirements and security, inventory management, and equipment maintenance.
- Personnel requirements and qualifications.
- Record-keeping and document maintenance requirements.
- Requirements for written policies and procedures.
Once the proposed rule is finalized, states and local governments may not establish or continue their licensure requirements for 3PLs, unless those requirements are the same as federal requirements.
The comment period for the proposed rule was extended to September 6, 2022. This will allow interested stakeholders additional time to submit comments.
What are the penalties for licensure non-compliance?
A failure to comply with 3PL provider licensing requirements can result in heavy fines, cease-and-desist orders, and the potential dissolution of your business. A state may also revoke your operating license leading to loss of revenue and reputational damage.
DSCSA also stresses license compliance because it requires 3PLs to verify that all trading partners, including your business, are authorized to engage in activities regulated by the Act. If found to be unauthorized, you maybe be excluded from the drug distribution supply chain.
As you can see, compliance is critical to long-term operational and financial success.
Managing compliance obligations, particularly license renewals, amidst ever-changing regulations should occupy an important part of your company’s day-to-day operations. Keeping track of renewal dates, fees, and necessary documents can be complicated and time-consuming.
CT Corporation’s team of experienced professionals can help you navigate the uniquely complex regulatory and licensing challenges for 3PLs. We will prepare and submit your 3PL license applications and consolidate all license fees into one simple invoice — saving you time, money, and frustration.
Once your licenses have been issued, CT Corporation ensures that they are renewed on time and your business remains compliant with 3PL licensing laws.
To learn more about how CT Corporation can help you manage your business license needs, contact a CT Corporation Service Representative or call (844) 701-2064.