BILL NUMBER: AB 1959	CHAPTERED  09/30/04

	CHAPTER  938
	FILED WITH SECRETARY OF STATE  SEPTEMBER 30, 2004
	APPROVED BY GOVERNOR  SEPTEMBER 29, 2004
	PASSED THE SENATE  AUGUST 23, 2004
	PASSED THE ASSEMBLY  MAY 26, 2004
	AMENDED IN ASSEMBLY  MAY 20, 2004
	AMENDED IN ASSEMBLY  APRIL 16, 2004
	AMENDED IN ASSEMBLY  APRIL 1, 2004

INTRODUCED BY   Assembly Members Chu, Frommer, Pavley, and
Ridley-Thomas

                        FEBRUARY 12, 2004

   An act to add and repeal Section 8546.9 of the Government Code,
relating to the State Auditor.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1959, Chu.  State Auditor:  drugs.
   Existing law authorizes the Department of General Services to
enter into contracts on a bid or negotiated basis with manufacturers
and suppliers of single-source or multiple source drugs, authorizes
the department to obtain from them discounts, rebates, or refunds as
permissible under federal law, and provides that those contracts are
exempt from competitive bid and other acquisition procedures
applicable to the state acquisition of goods and services.  Existing
law requires the State Department of Mental Health, the Department of
Corrections, the Department of the Youth Authority, and the State
Department of Developmental Services to participate in the program,
and authorizes other state, local, and public agency governmental
entities to elect to participate in that contracting program.
   Existing law, the Public Employees' Medical and Hospital Care Act,
authorizes the Board of Administration of the Public Employees'
Retirement System to contract with eligible carriers for health
benefits plans for employees and annuitants and major medical plans
or approve health benefits plans offered by employee organizations.
   Existing law authorizes the State Department of Health Services to
enter into contracts with manufacturers of single-source and
multiple source drugs, on a bid or nonbid basis, for drugs from each
major therapeutic category, and requires the department to maintain a
list of those drugs for which contracts have been executed.
Existing law also provides that those contracts are exempt from
competitive bid and other acquisition procedures applicable to the
state acquisition of goods and services.
   This bill would require the State Auditor to conduct an audit of
the state's procurement and reimbursement practices as they relate to
the purchase of drugs for or by state agencies, as specified, and
issue and provide to the Legislature an audit report no later than
May 31, 2005, and an analysis of the implementation of the
recommendations contained in the report.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 8546.9 is added to the Government Code, to
read:
   8546.9.  (a) The State Auditor shall conduct an audit of the state'
s procurement and reimbursement practices as they relate to the
purchase of drugs for or by state agencies, including, but not
limited to, the State Department of Mental Health, the Department of
Corrections, the Department of the Youth Authority, the State
Department of Developmental Services, the Public Employees'
Retirement System, and the State Department of Health Services.
   (b) The State Auditor shall issue and provide the audit report to
the Legislature no later than May 31, 2005.  The State Auditor shall
provide to the Chairs of the Assembly Health Committee, the Assembly
Budget Committee, the Senate Health and Human Services Committee, the
Senate Budget and Fiscal Review Committee, and the Joint Legislative
Audit Committee the State Auditor's analysis of the auditee's
one-year status report on the auditee's implementation of the
recommendations contained in the audit report.  It is the intent of
the Legislature, if the results of the status report warrant further
inquiry, that the Joint Legislative Audit Committee direct the State
Auditor to conduct additional audit work, as described in this
section, and to issue an additional audit report by June 2007.  If
circumstances continue to warrant additional work, it is the intent
of the Legislature that the Joint Legislative Audit Committee direct
the State Auditor to issue a third audit report by June 2009.
   (c) The audit report shall include, but not necessarily be limited
to, all of the following:
   (1) A review of a representative sample of the state's procurement
and reimbursement of drugs for the period examined to determine
whether the state is receiving the best value for the drugs it
purchases.
   (2) To the extent possible, a comparison of drug costs to the
state with drug costs to other appropriate entities such as the
federal government, the Canadian government, and private payers.
   (3) A determination of whether the state's procurement and
reimbursement practices result in savings from strategies such as
negotiated discounts, rebates, and contracts with multistate
purchasing organizations, and whether the strategies selected by the
state result in the lowest possible costs.
   (d) In preparing the audit report, as in the case of any other
audit, the Bureau of State Audits is subject to Section 8545.1 of the
Government Code.
   (e) This section shall remain in effect only until January 1,
2010, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2010, deletes or extends
that date.