Third-party logistics provider licensing requirements

What is a third-party logistics provider (3PL)?

Third-party logistics providers (3PLs) are entities that provide or coordinate warehousing or other logistics services on behalf of a pharmaceutical manufacturer, wholesale distributor, or dispenser. This can include handling or coordinating the movement of raw materials for drug manufacturing, operating storage facilities that house a distributor’s product, transporting pharmaceuticals, or managing all of these functions together.

Unlike manufacturers or distributors, a 3PL does not take ownership of the products it handles. It is also not responsible for directing the sale or disposition of those products.

That said, 3PLs are subject to a significant range of licensing and registration requirements at the state and federal levels. Multiple regulatory bodies may have jurisdiction, each with a vested interest in ensuring product safety and supply chain integrity.

State licensing requirements

In the United States, 3PLs that handle prescription drugs must be licensed under state law. A 3PL generally needs a license in the state where its facility is located and a non-resident license for other states it ships into.

Many states issue a dedicated 3PL license through the state board of pharmacy or department of health. Others require 3PLs to apply under an existing category, most commonly wholesale distributor, and a few require both a 3PL license and a wholesale distributor license. The U.S. Food and Drug Administration (FDA) has proposed national licensure standards that would eventually replace this patchwork, but they are not yet final (see the DSCSA section below).

Applications commonly ask for the following, though specifics vary by state:

• Business entity and ownership information
• Designated representative, often with fingerprints or a background check
• Home state license and a recent facility inspection report (for out-of-state applicants)
• Written policies and procedures
• Proof of liability insurance
• Surety bond
• A list of states where you are licensed or operate and customer information

If a 3PL maintain a physical facility, state inspectors may need to review it as part of the approval process. Application fees typically range from several hundred to several thousand dollars, and the approval timeline can run anywhere from one to three months depending on the state.

In addition to pharmaceutical licensing, 3PLs typically need standard business credentials, which vary by state and locality:

• State registration. Entity registration with the state, including foreign qualification in each state where the 3PL has a facility.
• General business license. City or county business license, as well as zoning approval and certificate of occupancy for each site.
• Resale certificate and sales tax registration. Generally needed if the 3PL buys products or supplies for resale, takes title to product, or sells taxable goods or services.
• Other state licenses. Many states require a separate food warehouse license for facilities that store food, including medical foods, and some states license medical device distribution separately.

Federal registration and reporting requirements

Pharmaceutical 3PLs are also subject to federal requirements administered by multiple agencies. Which requirements apply depends on the products a 3PL handles and how it handles them.

The Drug Supply Chain Security Act (DSCSA)

The Drug Supply Chain Security Act establishes a framework for securing the pharmaceutical supply chain against counterfeit, diverted, and otherwise illegitimate drug products. This section addresses requirements that apply to 3PLs. Manufacturers, wholesale distributors, repackagers, and dispensers are subject to different or additional obligations. 3PLs face several core requirements:

• Licensure and annual reporting. 3PLs must maintain the appropriate state licensure and report licensure and facility information to FDA each year, between January 1 and March 31, through CDER Direct, FDA’s electronic submission portal. Significant disciplinary actions must also be reported.
• Suspect and illegitimate product. 3PLs must have systems and processes in place to identify, quarantine, investigate, and respond to suspect or illegitimate product, including notifying FDA and trading partners when product is determined to be illegitimate. Related records must be retained for at least six years.
• Authorized trading partner status. A 3PL that is properly licensed and complies with annual reporting qualifies as an authorized trading partner. This matters commercially, because manufacturers, wholesale distributors, dispensers, and repackagers may only work with authorized 3PLs.

The DSCSA also directs FDA to establish national licensing standards for 3PLs and wholesale distributors. FDA published a proposed rule in February 2022, but it has not been finalized. As proposed, the standards would preempt differing state licensing requirements. Until then, state licensing requirements continue to govern 3PLs.

Federal requirements by agency

3PLs may be subject to requirements from the following federal agencies. (Note: FMCSA and PHMSA are both part of the U.S. Department of Transportation.)

U.S. Food and Drug Administration (FDA)

• Annual licensure reporting. Wholesale drug distributors and 3PLs must report licensure information to FDA each year, including significant disciplinary actions, through CDER Direct. This is a DSCSA requirement see above.
• Food facility registration. 3PLs that hold food, including medical foods such as enteral nutrition, generally must register each facility with FDA and renew every two years. This is separate from DSCSA annual reporting.
• Food cGMPs. Registered food facilities are subject to FDA’s current Good Manufacturing Practice requirements for food.
• Drug storage and handling. 3PLs handling prescription drugs must meet applicable state licensure and storage and handling requirements.

Drug Enforcement Administration (DEA)

• Controlled substances. 3PLs that store or take custody of controlled substances must register with the DEA as distributors under the Controlled Substances Act. Most states also require a state-level controlled substance registration or license.

Federal Motor Carrier Safety Administration (FMCSA) and Department of Transportation (DOT)

• Motor carrier registration. 3PLs that operate commercial motor vehicles in interstate commerce, or that haul or arrange freight for compensation, are regulated by FMCSA and generally need a USDOT number, FMCSA operating authority, and a designated process agent (Form BOC-3), among other registrations.

Pipeline and Hazardous Materials Safety Administration (PHMSA)

• Hazardous materials. Some healthcare products (ex. aerosols, flammable liquids, compressed gases, dry ice, and lithium batteries) are regulated as hazardous materials under PHMSA’s Hazardous Materials Regulations. 3PLs that offer or transport these materials must follow those rules and, depending on the type and quantity shipped, may also need to register annually with PHMSA.

What are the penalties for 3PL licensure non-compliance?

Penalties vary by state but can include heavy fines, license denial, cease-and-desist orders, and in some states criminal liability for operating without a required license. Losing a license can also mean lost business and reputational damage.

Licensing also determines whether others can work with you. Under the DSCSA, manufacturers, wholesale distributors, and dispensers may only transact with authorized trading partners. A 3PL is authorized only if it holds a valid state license where its state requires one and complies with FDA annual reporting. An unlicensed or non-reporting 3PL can therefore be effectively shut out of the pharmaceutical supply chain.

Conclusion

Staying compliant takes more than obtaining a license. Renewal dates, fees, and documentation requirements vary by state and change over time, so tracking them requires ongoing attention and can be time-consuming.

CT Corporation’s team of experienced professionals can help you navigate the complex regulatory and licensing landscape for healthcare 3PLs. We prepare and submit your 3PL license applications and consolidate your license fees into one simple invoice, saving you time and effort. Once your licenses are issued, we manage renewals so they are filed on time and help keep your business compliant with 3PL licensing requirements. To learn how CT Corporation can help you manage your 3PL licensing needs, contact a CT Corporation specialist today.

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