BILL ANALYSIS Ó AB 467 Page 1 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 AB 467 Page 2 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. AB 467 Page 3 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 AB 467 Page 4 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 AB 467 Page 5 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. AB 467 Page 6 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 AB 467 Page 7 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