BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 377 (Solorio) - Pharmacy.
Amended: August 6, 2012 Policy Vote: B,P&ED 9-0
Urgency: No Mandate: Yes
Hearing Date: August 13, 2012 Consultant:
Bob Franzoia
This bill may meet the criteria for referral to the Suspense
File.
Bill Summary: AB 377 would authorize a centralized hospital
packaging pharmacy to prepare medications, by performing
specified functions for administration only to inpatients within
its own general acute care hospital, or one or more general
acute care hospitals under the same ownership and located within
75 miles of each other. This bill would impose issuance and
annual renewal fees for a specialty license. Because these fees
would be deposited into the Pharmacy Board Contingent Fund, a
continuously appropriated fund, this bill would make an
appropriation.
Fiscal Impact: Minor costs annually to the State Board of
Pharmacy from the Pharmacy Board Contingent Fund, offset by
fees.
Potentially major costs annually to the Department of
Public Health from the Licensing and Certification Program
Fund.
Staff Comments: For the board, a hospital pharmacy is a
pharmacy located within any licensed hospital, institution, or
establishment that maintains and operates organized facilities
for the diagnosis, care, and treatment of human illnesses to
which persons may be admitted for overnight stay.
A hospital pharmacy also includes a pharmacy that may be located
outside of the hospital, in another physical plant that is
regulated under a hospital's consolidated license issued
pursuant to Health and Safety Code 1250.8. As a condition of
licensure by the board, the pharmacy in another physical plant
shall provide pharmaceutical services only to registered
hospital patients who are on the premises of the same physical
AB 377 (Solorio)
Page 1
plant in which the pharmacy is located. The pharmacy services
provided shall be directly related to the services or treatment
plan administered in the physical plant.
Under this bill, a centralized hospital packaging pharmacy would
obtain a specialty license from the board. Before issuing the
specialty license, the board shall inspect the pharmacy and then
annually. The board estimates a minor workload increase which
would be offset by issuance and annual fees of up to $800. The
fees reflect the same level set for sterile injectable
compounding pharmacies where annual inspections are required.
Staff notes existing law defines "manufacturer" as every person
who prepares, derives, produces, compounds or repackages any
drug or device except a pharmacy that manufactures on the
immediate premises where the drug or device is sold to the
ultimate consumer. Manufacturer does not mean (1) pharmacy
compounding a drug for parenteral therapy, pursuant to a
prescription or (2) a pharmacy that, at a patient's request,
repackages a drug previously dispensed to a patient, or to the
patient's agent, pursuant to a prescription.
Health care facilities are licensed, regulated, inspected,
and/or certified by a number of public and private agencies at
the state and federal levels, including the department's
licensing and certification program and the US Department of
Health and Human Services' Centers for Medicare and Medicaid
Services (CMS). CMS contracts with the department to ensure that
facilities accepting Medicare and Medi-Cal payments meet federal
requirements. The department is responsible for ensuring health
care facilities comply with state laws and regulations.
Under this licensing arrangement, hospital pharmacies fall under
the department's jurisdiction. According to the department,
increasing hospital pharmacy manufacturing or compounding
activities will increase inspection related workload. However,
there is some uncertainly as to the extent of the department's
jurisdiction and how that jurisdiction interacts with the
board's jurisdiction.
Existing law provides that hospitals are only able to provide
pharmaceutical services to patients on the same hospital
grounds. Pursuant to a recent communication by the federal Food
and Drug Administration, which regulates the compounding of
AB 377 (Solorio)
Page 2
patient prescriptions, states may pursue a centralized strategy
of regulation. The department would be required to provide
regulatory oversight to ensure that drugs manufactured or
compounded in compliance with the Current Good Manufacturing
Practices for pharmaceuticals when those drugs are repackaged
and delivered to another pharmacy or hospital.
Department staff conduct the following surveys pertaining to
hospital pharmacy services:
- Initial licensure surveys.
- Re-licensure surveys (every three years).
- MERP (medication error reporting and prevention) (every three
years).
- Validation surveys (randomly on 70 facilities annually).
- Complaint investigations (periodic surveys).
There are 433 general acute care hospitals, 37 acute psychiatric
hospitals and 6 chemical dependency rehabilitative hospitals
under the department's jurisdiction. Of those, 187 general
hospitals, 13 psychiatric hospitals and 1 rehabilitative
hospital share common ownership (201 of the total hospitals or
42 percent) and could prepare medications for any other hospital
pharmacy under common ownership. To perform all the necessary
surveys may require up to 4.6 pharmacy consultants (1,800 hours
per consultant) at a fiscal year cost of $182,000 per consultant
and an overall cost of $837,000 annually. The department's
estimate of workload appears to based on an oversight model that
will require not only the survey and oversight of the hospital
pharmacy performing the manufacturing but the same level of
survey and oversight of the hospital pharmacies (under common
ownership) receiving the medications and distributing them to
the patients in the other hospitals.
The department has authorization for 21 pharmacy consultants and
is budgeted for 15 pharmacy consultants. Not all hospital
pharmacies under common ownership would manufacture because of
cost and demand which should argue for an estimate of less than
42 percent of all hospitals needing the full range of
inspections. Additionally, this should not be a new inspection
but an additional component to existing inspections of
hospitals. How violations identified during inspections would
be addressed is uncertain because initial information indicates
hospital pharmacies are not issued licenses by the department.
The department may enforce violations through its food, drug and
AB 377 (Solorio)
Page 3
radiation safety authority.
Staff notes this bill grants the board, which adopted
regulations for compounded drug products in 2012, new authority
to initially and annually inspect centralized hospital packaging
pharmacies. The department does not inspect for single dosage
preparation but with multiple dosage preparation a hospital
pharmacy may be considered to be a manufacturer, which would
fall under the department's jurisdiction. Until there is a
clear definition of manufacturing, jurisdictional issues likely
will continue.