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Virtual manufacturers often operate in a regulatory environment that does not fit neatly into traditional licensing categories. Nowhere is this more evident than in California, where the state’s agency structure and statutory language combine to create a grey area that, in practice, leads to a very clear outcome. Although California does not explicitly state that virtual manufacturers located outside the state must hold a nonresident wholesale license, the way California regulates manufacturers and wholesalers makes the license the most defensible choice for any virtual manufacturer distributing prescription drugs into the state.
A frequent situation illustrates the issue clearly. A virtual manufacturer based in New Jersey uses an Ohio-licensed 3PL to distribute prescription drugs into California. The virtual manufacturer does not hold a California nonresident manufacturer or wholesaler license. The 3PLholds a California 3PL license but does not hold a California nonresident wholesaler license. No party in the distribution chain holds the license type that would authorize the product’s movement into California.
This is precisely the type of distribution pattern that forces the virtual manufacturer to evaluate California’s expectations.
California separates authority between two regulators. The California Department of Public Health licenses manufacturers located inside the state and only licenses facilities that physically handle drug product. Virtual manufacturers located outside California cannot qualify under this category. The California Board of Pharmacy, however, is responsible for licensing wholesale distribution and has incorporated virtual manufacturers into the wholesale licensing framework. The state’s wholesale application even includes a field specifically identifying virtual manufacturers, which strongly indicates the Board’s intent to regulate them under this license type.
Although California exempts FDA-registered manufacturers that distribute only their own products, this exemption does not apply to virtual manufacturers because they are not FDA-registered manufacturers. The exemption is narrowly tailored and cannot be used by entities that outsource manufacturing, even if they own the product and appear on the label. As a result, virtual manufacturers default into the wholesale licensing category.
There is a theoretical alternative. If a 3PL takes title to the product and manages distribution, the virtual manufacturer would need fewer state licenses. However, this model is rarely viable. The 3PL in the scenario does not hold a California nonresident wholesaler license and therefore cannot legally take title for California distribution. Most 3PLs avoid taking title because it increases their regulatory obligations and business risk. As a result, this option does not eliminate the underlying licensing gap.
While the statutes leave room for interpretation, enforcement patterns and industry practice point in a single direction. Virtual manufacturers that distribute prescription drugs into California are expected to hold a nonresident wholesale license. Most virtual manufacturers ultimately secure this license, particularly those shipping product nationally. California’s licensing system was not designed with the virtual model in mind, and the wholesale license is the only category that aligns with how the state administers its regulatory framework.
The ambiguity surrounding California’s requirements for virtual manufacturers is more structural than substantive. Once the roles of CDPH and the Board of Pharmacy are understood, the path becomes clear. Virtual manufacturers located outside California whose products enter the state should strongly consider obtaining a nonresident wholesale license. This approach aligns with California’s regulatory expectations, reduces compliance risk, and provides a stable foundation for ongoing distribution.
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