BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 467
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          Date of Hearing:   March 25, 2014

              ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER  
                                     PROTECTION
                               Susan A. Bonilla, Chair
                     AB 467 (Stone) - As Amended:  March 11, 2014
           
          SUBJECT  :   Prescription drugs: collection and distribution  
          program.

           SUMMARY  :   Establishes a license and regulatory framework for a  
          "surplus medication collection and distribution intermediary"  
          (SMCDI) to facilitate the donation of surplus medications in  
          California. Specifically,  this bill  :  

          1)Defines a "SMCDI" as a firm, association, partnership,  
            corporation, limited liability company (LLC), state  
            governmental agency, or political subdivision that performs  
            the functions specified in this bill for the purpose of an  
            authorized surplus prescription drug collection and  
            distribution program (Program). 

          2)Requires a SMCDI to be licensed annually and regulated by the  
            Board of Pharmacy (BOP).  The license application shall state  
            the name, address, usual occupation, and professional  
            qualifications, if any, of the applicant. If the applicant is  
            an entity other than a natural person, the application shall  
            state the information as to each person beneficially  
            interested in that entity.

          3)Defines the term "person beneficially interested" to mean and  
            include:

             a)   If the applicant is a partnership or other  
               unincorporated association, each partner or member;

             b)   If the applicant is a corporation, each of its officers,  
               directors, and stockholders, provided that no natural  
               person shall be deemed to be beneficially interested in a  
               nonprofit corporation; and,

             c)    If the applicant is a LLC, each officer, manager, or  
               member.

          4)Requires any applicant that is a 501(c)(3) charitable  








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            organization to furnish BOP with the organization's articles  
            of incorporation and names of the controlling members.

          5)Requires any applicant that is a partnership or other  
            unincorporated association, a LLC or a corporation that has  
            more than five partners, members, or stockholders to state  
            that fact on the application and provide additional  
            information on each of the five partners, members, or  
            stockholders who own the five largest interests in the  
            applicant's entity.  Upon request by BOP's executive officer  
            (EO), the applicant shall provide specified information on  
            partners, members, or stockholders not named in the  
            application, or shall refer BOP to an appropriate source of  
            that information.

          6)Requires the application to contain a statement to the effect  
            that the applicant or persons beneficially interested have not  
            been convicted of a felony and have not violated state law, as  
            specified.  If the applicant cannot make this statement, the  
            application shall contain a statement of the violation, if  
            any, or reasons which will prevent the applicant from being  
            able to comply with the requirements with respect to the  
            statement.

          7)Requires the BOP EO to issue or renew a license to operate as  
            a SMCDI upon approval of the application, compliance with  
            specified state laws, and payment of $300.

          8)Requires fees received for the SMCDI license to be deposited  
            into the Pharmacy Board Contingent Fund.

          9)Exempts government-owned or 501(c)(3) non-profit applicants  
            from the fee requirement.  

          10)Exempts SMCDI licensees from licensure as a wholesaler.

          11)Requires a licensed SMCDI to keep and maintain for three  
            years complete records for which the intermediary facilitated  
            the donation of medications to, or transfer of, medications  
            between participating entities. 

          12)Defines a "donor organization" as those health and care  
            facilities already authorized under existing law to donate  
            centrally stored unused medications under a Program, as  
            specified.








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          13)Excludes a SMCDI from criminal or civil liability for injury  
            caused when facilitating the donation of medications to, or  
            transfer of, medications in compliance with Program laws.

          14)Requires a SMCDI to comply with the following:

             a)   It shall not take possession, custody, or control of  
               dangerous drugs and devices;

             b)   It shall ensure that notification is provided to  
               participating entities that a package has been shipped when  
               the SMCDI has knowledge of the shipment and provided  
               logistical support to facilitate a shipment directly from a  
               donor organization to a participating entity; and,

             c)   It shall not select, or direct a donor organization to  
               select, a specific participating entity to receive surplus  
               medications. 

          15)Authorizes a SMCDI to do the following:

             a)   Charge membership, administrative, or overhead fees  
               sufficient to cover the reasonable costs of the support and  
               services provided; and,

             b)   Contract directly with a county to facilitate the  
               donation of medications to or transfer of medications  
               between participating entities and provide general support  
               in a county's implementation of a Program.

          16)Prohibits a participating entity from receiving donated  
            medication directly from a SMCDI. 

          17)States that no reimbursement is required by this act because  
            the only costs that may be incurred by a local agency or  
            school district will be incurred because this act creates a  
            new crime or infraction, eliminates a crime or infraction,  
            changes the penalty for a crime or infraction, or changes the  
            definition of a crime.

          18)Declares this bill to be an urgency statute necessary for the  
            immediate preservation of the public peace, health, or safety  
            within the meaning of Article IV of the Constitution and shall  
            go into immediate effect in order to "ensure that California's  








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            medication donation program is allowed to continue to operate  
            to facilitate the distribution of medications to the indigent  
            population which would not otherwise have access to these  
            medications".

          19)Makes other technical and clarifying changes.

           EXISTING LAW  :

          1)Establishes a voluntary, county-operated Program to distribute  
            surplus medications to persons in need of financial assistance  
            to ensure access to necessary pharmaceutical therapies.   
            (Health and Safety Code (HSC) Section 150200, 150204) 

          2)Requires a county to establish written procedures for its  
            Program including, at a minimum, the following:

             a)   Establishing eligibility for medically indigent patients  
               who may participate in the program;

             b)   Ensuring that patients eligible for the program shall  
               not be charged for any medications provided under the  
               program;

             c)   Developing a formulary of medications appropriate for  
               the repository and distribution program;

             d)   Ensuring proper safety and management of any medications  
               collected by and maintained under the authority of a  
               participating entity; and,

             e)   Ensuring the privacy of individuals for whom the  
               medication was originally prescribed. (HSC 150204)

          3)Establishes the California Board of Pharmacy (BOP) to regulate  
            the practice of pharmacy and enforce the Pharmacy Law.  
            (Business and Professions Code (BPC) Section 4001)

          4)Defines a "wholesaler" as a person who acts as a wholesale  
            merchant, broker, jobber, customs broker, reverse distributor,  
            agent, or a nonresident wholesaler, who sells for resale, or  
            negotiates for distribution, or takes possession of, any drug  
            or device, as specified.  Unless otherwise authorized by law,  
            a wholesaler may not store, warehouse, or authorize the  
            storage or warehousing of drugs with any person or at any  








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            location of drugs with any person or at any location not  
            licensed by BOP. (BPC 4043)

           FISCAL EFFECT  :   According to the Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.

           COMMENTS  :   

           1)Purpose of this bill  .  This bill authorizes a third party,  
            licensed and regulated by BOP, to facilitate the donation and  
            transfer of surplus medications under an established state  
            surplus medication donation program.  This bill is author  
            sponsored.

           2)Author's statement  .  According to the author, current law  
            accounts for wholesale activities and the appropriate  
            licensing for those activities, but does not account for third  
            party intermediaries in the context of a county operated  
            Program.  Third party intermediaries provide significantly  
            different services than a wholesaler, and therefore need a  
            license that reflects those services.  

           3)Background  .  The Program was created by SB 798 (Simitian,  
            Chapter 444, Statutes of 2005) and SB 1329 (Simitian, Chapter  
            709, Statutes of 2012), which authorize counties to establish  
            a system to facilitate the collection and distribution of  
            surplus unused medications to medically indigent persons.  

            The enabling legislation did not anticipate a third party  
            facilitating the transfer and donation of drugs, however.   
            Current law requires any entity that brokers or negotiates  
            drugs for distribution to obtain a wholesaler license and be  
            subject to numerous regulations, including posting a surety  
            bond, designating a representative in charge, and extensive  
            reporting requirements.  

            This bill establishes a specific license for the sole purpose  
            of the Program, and establishes what a SMCDI may and may not  
            do within the terms of licensure.  

            To date, two counties in California (Santa Clara and San  
            Mateo) have established a Program through local ordinance,  
            although the Santa Clara Program is the only current  
            operational program.  









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           4)Arguments in support  .  The Santa Clara County Board of  
            Supervisors writes, "SB 798 (Simitian) Chapter 444, Statues of  
            2005, established a voluntary drug collection and distribution  
            program to allow surplus medications to be shared with persons  
            in need of financial assistance.  The County of Santa Clara  
            established such a program in 2008 in partnership with a  
            not-for-profit organization.  Our program helps increase  
            access to necessary prescription drugs for the medically  
            indigent and reduces health care costs and the environmental  
            impact of pharmaceutical waste.  Recently, however, the  
            activities related to the donation and distribution of  
            medications under the program have been considered to be  
            wholesaling activities and required to be licensed.  This  
            determination puts our program at risk of closing down.

            "Your AB 467 would address this issue by providing that  
            activities related to the donation or distribution of  
            medication are not wholesale activities.  This would allow our  
            County's program and other similar efforts to continue."  

           5)Urgency measure  .  This bill contains an urgency clause "[t]o  
            ensure that California's medication donation program is  
            allowed to continue to operate to facilitate the distribution  
            of medications to the indigent population which would not  
            otherwise have access to these medications".

           6)Recent amendments  .  This bill was substantially amended in the  
            Senate to address third party facilitation of surplus  
            medication transfers.  However, when the bill was approved in  
            the Senate and returned to the Assembly for concurrence on  
            February 6, a technical error in the language was discovered.   
            The bill was returned to the Senate on February 10 for  
            correction. The Senate's actions were rescinded and the  
            necessary technical amendments were made on March 11.  The  
            revised bill was passed and ordered to the Assembly on March  
            13.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Association of Health Facilities
          California Hospital Association
          California State Board of Pharmacy
          Californians Against Waste








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          California State Association of Counties
          The Santa Clara County Board of Supervisors
          Sirum

           Opposition 
           
          None on file.
           
          Analysis Prepared by  :    Sarah Huchel / B.,P. & C.P. / (916)  
          319-3301