Regulatory Compliance Program and License Portfolio

VGM Fulfillment (VGMF) is a specialized warehousing and fulfillment business that provides service for prescription devices and medical resupply products. Since 2009, we have been shipping to patients all around the United States. We are one of many divisions of VGM Group, Inc., which has been in business for more than 36 years. This report demonstrates our diligence and commitment to maintaining strict compliance with all applicable state and federal laws and regulations. Our experts in government relations and regulatory compliance are here to simplify the complexity of pharmaceutical supply chain regulation. We appreciate the opportunity to continuously earn your trust.

Contents

• Business Design

• Facility Licensing and Regulation

• Licensed Professionals and Medical Device Technicians Setting PAP Machine Pressures

• Oversight and Quality Management

IMPORTANT NOTE: This report and the findings herein, conclusions, and recommendations it contains do not constitute legal advice for the benefit of any other person or entity. Any third party that comes into possession of this report should seek the advice of its own legal counsel.

Business Design

The fundamental mission for any healthcare compliance program is to ensure patients receive the best possible care where they live. A key part of the job of healthcare regulators is to protect patients in their own state. We are committed to keeping these ideals in mind when developing our programs and researching applicable state and federal laws and regulations. This and other unique features of VGMF’s business design are important factors that comprise our Regulatory Compliance Program and License Portfolio.

VGMF ships prescription medical devices and supplies (positive airway pressure devices, or PAPs, and continuous glucose monitors) on behalf of DME Suppliers directly to their patients. VGMF does not purchase or assume ownership of the product as it holds inventory on consignment from the DME Manufacturers.

The Patient places their order with the DME Supplier, who handles the initial and continuous care of the Patient, as well as any billing of the product to the Patient or their insurance provider. The only fee that VGMF charges is a shipping and handling fee to the DME Supplier.

The DME Supplier sends the Patient orders electronically to VGMF for shipping. VGMF processes, picks, packs, and ships the order directly to the Patient on behalf of the DME Supplier. VGMF sends the device serial number, shipping, and tracking information to the DME Supplier. VGMF sends tracing reports to the DME Manufacturer to account for the medical device product that has been shipped on behalf of the DME Supplier. DME Manufacturer negotiates product pricing directly with the DME Supplier and invoices them for the product shipped.

Patient DME DME VGM Fulfillment (VGMF)

Start

Patient receives product

Carrier delivers the package to the Patient

Order placed with VGMF

Orders are submitted and entered into VGMF system.

VGMF receives order

VGMF receives product as consignment inventory

Carrier (UPS®, FedEx® and USPS®) picks up packages.

DME Supplier receives invoice (pick, pack, ship only)

VGMF picks, packs, and ships order using consigned inventory

Orders are dropped to VGMF for picking, packing, and shipping.

VGMF generates tracking report for DME Manufacturer

Tracking and invoicing is submitted to the DME Supplier.

VGMF generates invoice for DME Supplier (pick, pack, ship only)

VGMF receives payment from DME Supplier (pick, pack, ship only)

DME Supplier is billed customary pricing by the DME Manufacturer for the products shipped. VGMF bills for shipping and handling.

DME Supplier receives invoice from DME Manufacturer

DME Manufacturer ships product to VGMF

DME Manufacturer receives tracking report

DME Manufacturer generates invoice for DME Supplier (product only)

DME Manufacturer receives payment for product shipped

Facility Licensing and Regulation

We took the guesswork out of all applicable state licensing laws and regulations across the United States so DME Suppliers can focus on their Patients.

VGMF has invested heavily in research of the pharmaceutical supply chain distribution industry to determine appropriate licensure to set and ship prescription devices. We partner with State Licensing Services, Inc. (SLS) to manage applications, renewals, and maintenance of the various state licenses issued by the state boards of pharmacy and other state regulatory authorities.

Licensure requirements are ever-changing, and with VGMF’s compliance monitoring and updates, we can keep track of the newest changes so that decisions can be made to ensure compliance with applicable state laws and regulations.

Our Regulatory Compliance Program includes ongoing inspections for licenses, renewal process, regulatory monitoring, keeping regulators informed, and policy management. Licensure requirements are ever-changing, and with VGMF’s compliance monitoring and updates, we can keep track of the newest changes so decisions can be made to ensure compliance with applicable state laws and regulations.

VGMF is very proud of its regulatory compliance record as evidenced by only one (1) regulatory complaint since 2009. We learned from that experience and are committed to preventing any reoccurrence. Our compliance team continuously monitors new and amended state laws and regulations, ensuring VGMF is in compliance with applicable requirements.

Below is a list of current third-party logistics and durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) licenses held by VGMF in those states where we are currently shipping prescription devices on behalf of our DME Suppliers. Third Party Logistics licenses are required for shipping prescription devices into applicable states, while DMEPOS licenses are required when those shipments are made directly to Patients in applicable states. The following factors are important to note when reviewing the enclosed table because they were major considerations of the applicable state regulatory authorities when determining appropriate licensure:

1. Patient Care: VGMF ships directly to a person or Patient’s home, but the DME Supplier is responsible for direct Patient care, assessment, diagnosis, treatment, evaluation, education, and monitoring compliance to therapy.

2. Billing: VGMF holds product on consignment; therefore, the sale of the product remains between the DME Manufacturer and DME Supplier. VGMF also does not bill insurance, federally funded programs, or the Patient for reimbursement or co-pays.

3. Prescription Devices, Not Prescription Drugs: The medical devices VGMF stores and ships contain no prescription drugs.

When laws and regulations in a state did not specifically address VGMF’s current business design above, VGMF secured the most applicable licensure. Our compliance team consistently monitors new and amended state legislation and regulation, ensuring VGMF stays in compliance with appropriate licensure requirements.

VGMF License Obtained

Alaska

Arizona

California

Connecticut

Hawaii

Illinois

Iowa

Kansas

Kentucky*

Louisiana

Mississippi*

Montana*

Nevada

New Hampshire

New Jersey

North Carolina

North Dakota

Oregon

Pennsylvania

Rhode Island

South Carolina

Tennessee

Utah

Virginia

District of Columbia

Fulfillment Warehouses

Phoenix, AZ

Waterloo, IA

Shiremanstown, PA

Nashville, TN

VGM License Exempt

Alabama

Arkansas

Colorado

Delaware

Florida

Georgia

Idaho

Indiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Missouri

Nebraska

New Mexico

New York

Ohio

Oklahoma

South Dakota

Texas

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

Licensed Professionals and Medical Device Technicians Setting

PAP Machine Pressures

The expansion of VGMF’s PAP (Positive Air Pressure) Setup Program to set physician-prescribed pressures on machines required an in-depth analysis of state laws and regulations concerning this type of work. The scope of the research was limited to the applicable governing board laws and regulations in each state as it relates to physically setting pressures on PAP machines for patients that live in their state and whether professional licensure is required to do this work.

The research resulted in 35 states and the District of Columbia that would permit a Medical Device Technician (MDT) to set the pressures on a PAP machine with oversight of a Licensed Professional (LP); 15 states indicated an LP would be required to set the pressures on a PAP machine. A high-level summary of these results are shown in the map below.

Licensed Professionals Required to Set PAP Machine Pressures

Arizona

California

Connecticut

Idaho

Kentucky

Maine

Nevada

New Hampshire

New Jersey

North Dakota

Ohio

Pennsylvania

South Carolina

Tennessee

West Virginia

Wisconsin

Medical Device Technicians Can Set Machine Pressures (with Oversight)

Alabama

Alaska

Arkansas

Colorado

Delaware

Florida

Georgia

Hawaii

Illinois

Indiana

Iowa

Kansas

Louisiana

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

New Mexico

New York

North Carolina

Oklahoma

Oregon

South Dakota

Texas

Utah

Vermont

Virginia

Washington

Wyoming

Rhode Island

District of Columbia

The policies and procedures created for the PAP Setup Program comply with the above state laws and regulations. VGMF employs several appropriately Licensed Professionals, who are licensed in all 50 states and the District of Columbia, and either set the pressures on the PAP machines or provide oversight to MDT setting the pressures. MDT go through regular training and supervision from a Licensed Professional, including a formal, documented competency assessment.

Licensed Professionals and Medical Device Technicians Setting PAP Machine Pressures

MDT can set up equipment, but that is the extent of what they can do without a license.

Alaska does not regulate DME or does not require a license for respiratory therapy. No information found regarding requirements for CPAP setup and installation.

During an April 2017 meeting, the Medical Board voted that DME companies are not required to have a licensed respiratory care practitioner on staff, nor are they required to have a respiratory therapist set up and/or deliver equipment. Any questions regarding treatment and procedures must be referred to the licensed physician/respiratory therapist.

The device must be set by a respiratory therapist, or another healthcare practitioner authorized to perform this type of function pursuant to their respective scope of practice (i.e., nurse).

State Governing Board From Correspondence

The Idaho State Board of Medicine believes that the initial setup and training of the use of the equipment, supplies, and medication requires the skill and knowledge of a licensed respiratory care practitioner or other qualified licensed health care provider. Any changes to the settings of the equipment, dosage of the medication or liter flow of oxygen should be made by a licensed respiratory care practitioner or qualified licensed health care provider.

Anyone who is providing the service that you describe must be a licensed respiratory therapist in Kentucky. The machine may also be set by another health professional, licensed in Kentucky, who is practicing within their own scope of practice.

CPAP machines are considered respiratory care equipment and will require a license to operate on others.

Unlicensed individual is only able to set up machine. Licensed RCP can give general information on durable equipment/equipment orientation services (mechanical instruction).

New Mexico Respiratory Care Advisory Board

The Board determined that, pursuant to: N.J.A.C.13:44F-3.3 (/):The licensed respiratory care practitioner who delegates tasks set forth in N.J.A.C.13:44F (d) in an outpatient setting shall ensure a followup visit from a licensee or a person exempt from respiratory care licensure pursuant to N.J.S.A. 45:14E-9 ( c ), takes place within 24 hours of delivery of the equipment to the patient for the purpose of conducting an in-person assessment of the equipment.

The board does not have specific rules that address requirements for individuals setting up CPAP machines.

Any instruction to the patient regarding the prescription, the clinical use of equipment or patient monitoring, patient assessment, or other procedures designed to evaluate the effectiveness of the treatment must be performed by a licensed respiratory therapist/technician or another authorized practitioner such as a physician or registered nurse. Non-licensed personnel may only deliver respiratory equipment for use by a patient.

A person who provides only support activities as defined in G. S. 90-648(13) is exempt as an unlicensed individual. They may:

Delegation by a respiratory care practitioner to unlicensed persons

N.M. Code R. § 16.23.14.11

NMSA 1978, Section 61-12B-3.C 61-12B-4

Rule 16.23.3.8

North Carolina North Carolina Respiratory Care Board

a. Deliver, set up, and calibrate prescribed respiratory care equipment.

b. Provide instructions on the use, fitting, and application of apparatus.

c. Demonstrate the mechanical operation for the patient, or caregiver.

Ohio State Medical Board of Ohio

A continuous positive airway pressure (CPAP) machine is within this definition and therefore setting pressure constitutes respiratory care. It is understood by this committee that “setting pressures” means the respiratory care professional is acting under the order of a physician or other approved provider.

Oklahoma

Oklahoma Board of Medical Licensure Respiratory Care Advisory Committee

Respiratory

Care

MDT Pennsylvania State Board of Osteopathic Medicine Statute 63 P.S. 422.13a(a.1) LP

Oregon Health Licensing Office

Care Practitioners Board Rhode Island Dept. of Health

Respiratory

37-28-102(3)(a), MCA MDT South Carolina

South

Wisconsin Wisconsin Respiratory Care Practitioners

Unlicensed, trained personnel could fix the settings on the machines pursuant to a physician’s order. The unlicensed individual could also offer masks for the patient to try and the patient to determine which one fits correctly, i.e., the patient fits the mask and turns on the machine to check the fit. The Advisory Board said any subsequent fittings after the initial one would have to be done by a licensed respiratory therapist.

Wyoming Wyoming State Board for Respiratory Care

The service you describe (adjusting the settings on a CPAP machine) generally falls into the scope of practice of a respiratory care practitioner and does require a credential.

ss. 15.08 (5) (b), 227.11 (2), and 448.40 (1), S

A Wyoming respiratory care practitioner license is not needed to transport and install respiratory care equipment.

A Wyoming licensed respiratory care practitioner license will be required if the person is determining the equipment settings and the person is instructing the patient and is monitoring the patient’s condition.

Oversight and Quality Control

At VGMF, we take pride in meeting the needs of our DME Supplier customers and strive to address any issues promptly and effectively. Our dedicated Customer Success Team is here to assist with any concerns or questions you may have. If any concerns arise, we have a defined procedure for resolving issues and escalating them to the appropriate parties, ensuring that your needs are met in a timely and professional manner. The process includes gathering necessary information to resolve the complaint, reporting back to the customer within one business day, and escalating the complaint based on severity. All communication and documentation related to your feedback is stored securely in our internal system for future reference and quality management.

VGMF uses advanced software to automate its order processing procedures, including order validation, pick assignment, and shipping checks. Any failed job is automatically alerted to the appropriate team. Orders submitted through the customer portal are checked for completeness and accuracy, and an exception report is generated hourly to capture any rejected orders for the DME Supplier to review and resubmit. Warehouse personnel are intelligently routed through the warehouse to pick items that are closest to them, ensuring maximum efficiency. Orders are also checked for accuracy and completeness before shipping, and any flagged orders are independently reviewed before being shipped or re-picked. These important quality measures result in a 99.85% order accuracy rate.

Another component of VGMF’s oversight and quality control processes is that MDTs—beyond new hire processes—receive annual training and competency testing from an LP. This ensures VGMF’s standards for setting pressures on PAP machines are continuously met. VGMF has also established an internal audit component to the PAP Setup Program. During the audit process, one machine is selected at random for each MDT servicing equipment that day. It is then inspected for complete and accurate settings. Having this additional oversight from an LP demonstrates VGMF’s commitment to effective quality management.

VGMF practices an open, transparent, and sincere attitude toward compliance. We are willing to work with all DME Suppliers and DME Manufacturer partners through various channels to collaborate on regulatory compliance inquiries, clarifications, challenges, and solutions.

Our top priority is the care, safety, and service of your Patients, DME Suppliers, and DME Manufacturers. We are here to simplify the complexities of doing business and improve the quality of Patient lives. Thank you for the opportunity to share our Regulatory Compliance Program and License Portfolio and for trusting VGMF with your business.