BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
484 (Wright)
Hearing Date: 05/28/2009 Amended: 05/12/2009
Consultant: Jacqueline Wong-HernandezPolicy Vote: Public Safety
6-1
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BILL SUMMARY: This bill provides that any person who obtains
ephedrine, pseudoephedrine, and specified related drugs without
a prescription, as specified, shall be guilty of an infraction
or misdemeanor.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Potential revenue loss
Sales Tax $435- $4,350
$435-4,350 $435-4,350 General
PERS Unknown, potential
indirect costs to premiums
Medi-Cal* $0
$0 $0 General
Potential savings
CDCR ($1,989-$3,979)
($1,989-$3,979) ($1,989-$3,979) General
Toxic Substance Control ($500-1,000) ($500-1,000)
($500-1,000) General
Bureau of Forensic Services ($500-1,200) ($500-1,200)
($500-1,200) General
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STAFF COMMENTS: SUSPENSE FILE
This bill requires products containing pseudoephedrine and
related drugs to be dispensed only with a prescription, which
will restrict their availability (and reduce diversion for
illicit drug production) and eliminate the state's ability to
collect sales tax on these products. This bill is likely to
cause both substantial sales tax revenue loss to the state, and
substantial state savings in incarceration and clandestine
methamphetamine lab clean up. These costs and savings will both
begin to occur in the first year, and the net fiscal outcome
will be determined by the behavior of individuals, private
companies, and state agencies. It is likely that more
substantial long term savings will result from the bill, beyond
what is reflect in the fiscal analysis of the first three years.
Prior to 1976, products containing pseudoephedrine and certain
related drugs were available only by prescription. For the
following 30 years, they were available over the counter without
restriction (for most products, not including certain diet
pills). The most common products containing pseudoephedrine are
allergy and cold medicines, since it is used medically as a
decongestant. The federal Combat Methamphetamine Epidemic Act of
2005 ( Title VII of the USA PATRIOT Improvement and
Reauthorization Act of 2005, P.L. 109-177 ) was signed into law
March 9, 2006, (and went into effect in April 2006) which
required that all products containing ephedrine,
pseudoephedrine, or phenylpropanolamine be kept behind a
pharmacy counter (or in some way locked up), and that
individuals wishing to purchase them must present identification
and record various indentifying information and a signature in a
log book kept by the retailer. This law also limited the
quantity that could be purchased in a 30-day period.
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SB 484 (Wright)
States were required to comply with this law, or to pass more
restrictive laws governing the dispensation of pseudoephedrine
and related products. Oregon passed a law classifying these
products as controlled substances, and required that purchasers
have a prescription for the product. This law went into effect
on July 1, 2006.
Drug companies that produced brand-name drugs that were affected
by this law reformulated their products with other active
ingredients (eliminating pseudoephedrine) and kept the new
products (under the same name), on the accessible shelves and
the original products behind the pharmacy counter. There are,
for example, two different formulas of Claritin, Zyrtec,
Sudafed, and Tylenol Sinus. Other products, such as DayQuil,
were reformulated to meet the new over-the-counter (OTC) laws,
and the original product was discontinued.
Based upon Board of Equalization 2004 sales estimates of the
pseudoephedrine and related products in California, there
appears to have been a 90% decrease in purchases of these
products since 2004. This is likely attributable to increased
restrictions on the products. In the past few years, consumers
either purchased a different OTC formula or product, and did not
take the extra steps of standing in line and recording their
personal information to purchase the original products, or they
went to their doctors and got prescriptions for different
products. It is very likely that most consumers purchased items
that were available on the shelf, especially when labeled with
the same brand and purpose as the products they previously
purchased in the same manner. Even with a 90% decrease in sales
of pseudoephedrine and related products, sales are substantial.
In 2008, approximately $62,151,935 in gross sales revenue was
generated from these products in California, all purchased
behind the counter in retail establishments. The state-only
portion of the approximate sales tax revenue was $4,350,635.
Since there is no sales tax collected on prescription drugs,
making all of these products available only be prescription
jeopardizes the sales tax revenue to the extent that consumers
seek prescriptions for these products. If there was an
additional 90% decrease in use (as was seen when consumers had
to take additional steps to obtain these products), there would
still be a $435,000 loss in state sales tax annually. Moreover,
the decrease (and change to other OTC products) is likely to be
less substantial because the existing pool of consumers consists
of individuals who already take additional, inconvenient steps
to obtain these specific products. Additionally, for consumers
with private insurance plans with low copayments, it may be less
expensive to get a prescription for these products than to buy
and alternative OTC product, incentivizing some consumers
(especially those with ongoing conditions such as allergies) to
get prescriptions.
Restricting pseudoephedrine products further will likely result
in substantial savings, to the extent that they are being
diverted to produce methamphetamines. Production alone, in
California, disaggregated from methamphetamine possession and
use, results in more than $4,000,000 in state incarceration
costs.** Methamphetamine lab clean up cost the California
Department of Toxic Substance Control (DTSC) $1,055,098 in 2008,
and various state law enforcement agencies (primarily the Bureau
of Forensic Services) about $1,500,000 annually. There are
additional costs to local law enforcement, county jails, and
courts.
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SB 484 (Wright)
Since requiring prescriptions for these drugs in 2006, Oregon
has seen a 91% decrease in methamphetamine labs, which has
resulted in corresponding state savings for both incarceration
and clean up. If this bill results in a fraction of the decrease
seen in Oregon, the savings would be substantial. Because Oregon
began requiring prescriptions just two months after the federal
restrictions, however, it is unclear how much of the decrease in
methamphetamine production is the direct result of requiring
prescriptions. Oregon saw a 71% decrease in 2006, at the same
time that California saw a 25% decrease after implementing the
federal law. It was thought that the restrictions on the
necessary ingredients for methamphetamine production were
pushing labs into Mexico in 2005-2007.
In 2008, Mexico outlawed the use and importation of
pseudoephedrine, in an attempt to combat its own methamphetamine
production problem. The US Drug Enforcement Agency (DEA) has
indicated that it expects an increase in production in the
United States as a result of this law, but also notes that
production may move to Central and South America, where
enforcement is much more difficult.
The extent to which methamphetamine production and related
crimes in California would be reduced by this bill is unknown.
It is likely that more restrictive laws in California will push
methamphetamine production to Nevada and other neighboring
states, which will result in state savings directly related to
lab clean up, and likely decrease incarceration for
methamphetamine production (which carries longer sentences than
possession). According to law enforcement officials,
pseudoephedrine-containing pills are the most common way
methamphetamines are domestically produced, and diversion of
these products for illicit use is rampant. There is extensive
reporting of "smurfing" operations, in which several people go
from store to store purchasing the legal limit of
pseudoephedrine products. By eliminating their ability to do so,
production will decrease substantially. While it is
well-documented that blister packs of pills are found in
methamphetamine production labs in California, and can often be
traced to California retail purchases, it is not known the
extent to which the purchases currently made in retail stores
(and from which the state receives sales tax) are being diverted
for methamphetamine production.
It is not possible to determine the extent to which the
inevitable loss in sales tax may yield far greater savings to
the state in averted specific criminal activity and the myriad
costs it incurs.
* Medi-Cal already covers OTC medications, and requires a
doctor's authorization in order for Medi-Cal to pay for them.
**Based on the LAO's calculation of $23,000 residual cost to
incarcerate each inmate. There are only 173 inmates in state
prison for specific methamphetamine production crimes,
including: (11379.6 H&S) manufacturing of methamphetamine,
(11383 H&S) possessing pseudoephedrine with intent to
manufacture methamphetamine, and (11383.5 H&S). Calculation
based on the lowest prison term, and does not include related
enhancements.