BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1095 (Rubio) - Pharmacy: clinics
Amended: As Introduced Policy Vote: BP&ED 8-0
Urgency: No Mandate: Yes
Hearing Date: April 30, 2012
Consultant: Jennifer Douglas
This bill does not meet the criteria for referral to the
Suspense File.
Bill Summary: SB 1095 expands the types of clinics to which the
Board of Pharmacy may issue a license for purchasing drugs at
wholesale to include accredited outpatient settings and
ambulatory surgical centers participating in the Medicare
Program, in addition to surgical clinics, and authorizes the
board to conduct compliance inspections at any time.
Fiscal Impact:
Compliance inspection costs of estimated $164,000 in
2013-14 to the Pharmacy Board Contingent Fund, offset by
clinic licensing fees deposited in the Pharmacy Board
Contingent Fund; assuming inspections commence six months
after the effective date of the bill.
Similar compliance inspection costs in 2014-15, 2015-16,
2016-17; licensing revenue fee shortfall of estimated
$63,000 annually.
Potentially reduced compliance inspection activities in
2017-18 and ongoing, costs offset by fees.
Background: Existing law provides for the licensure and
regulation of the practice of pharmacy by the California State
Board of Pharmacy (the board) within the Department of Consumer
Affairs. A surgical clinic that is licensed by the board is
authorized to purchase drugs at wholesale for administration or
dispensing, under the direction of a physician, to patients
registered for care at the surgical clinic. Surgical clinics
are required to comply with various regulatory requirements and
the board is authorized to inspect a surgical clinic at any time
in order to determine whether a surgical clinic is operating in
compliance.
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Accredited or Medicare certified Ambulatory Surgical Centers
(ASCs) are not currently authorized to obtain a license to
purchase medications wholesale. The California Court of Appeal
ruled in Capen v. Shewry (2007) to prohibit the Department of
Public Health (DPH) from licensing ASCs that are either
partially or fully owned by a physician, even if the
physician-owned ASC is properly accredited and Medicare
certified. As a result, the board cannot grant an ASC a
license. This bill would provide physician-owned ASCs the
proper licensing necessary to purchase certain drugs wholesale
and store them on site.
Related Legislation: AB 847 (B. Lowenthal) of 2011 was
substantially similar to SB 1095. The bill died in the Assembly
Health Committee without being heard.
AB 2292 (B. Lowenthal) of 2010 would have permitted the Board of
Pharmacy to grant a limited license to an accredited or Medicare
certified ambulatory surgical center to allow them to purchase
drugs at wholesale and would have allowed the board to conduct
inspections of these clinics at any time. The bill died on the
Assembly Appropriations Committee suspense file.
AB 1574 (Plescia) of 2008 contained similar provisions to those
proposed in AB 2292 (2010). The bill was vetoed by the Governor
stating: "The bill failed to address the larger issue concerning
the Capen v. Shewry ruling."
Staff Comments: Surgical clinics currently pay an initial
application fee of $400 and an annual renewal fee of $250 for a
license to purchase drugs at wholesale. The bill authorizes the
board to conduct compliance inspections of licensed clinics at
any time. Because ASCs are not currently authorized to obtain a
license by the board and are not inspected or licensed by
another state agency the board may need to perform annual
inspections of the new clinics the first few years. Because the
bill significantly expands the entities that can seek licensure
by the board an additional inspector may be needed to ensure
that new clinics are appropriately complying with the board's
requirements. This analysis estimates personnel costs for one
inspector of $164,000 annually. If the board inspects these new
clinics annually for the first four years then 410 clinics,
paying the initial application fee of $400, would need to become
newly licensed in the first year to cover the board's expenses.
However, the following three years the clinics would only be
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paying a $250 renewal fee, leaving the board with an annual
revenue shortage of $62,500 during that three year period, for a
total revenue shortage of $187,500 by the end of the fourth
year. If the frequency of compliance inspections is reduced in
the fifth year then costs could be offset by renewal fees.