BILL ANALYSIS                                                                                                                                                                                                    Ó







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        |Hearing Date:June 17, 2013         |Bill No:AB                         |
        |                                   |1045                               |
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                      SENATE COMMITTEE ON BUSINESS, PROFESSIONS 
                               AND ECONOMIC DEVELOPMENT
                              Senator Ted W. Lieu, Chair
                                           

                       Bill No:        AB 1045Author:Quirk-Silva
                        As Amended:June 6, 2013  Fiscal:   Yes

        
        SUBJECT:    Sterile compounding and nonresident pharmacies. 
        
        SUMMARY:  Requires patients to be notified within 24 hours of a recall  
        notice for a sterile compounded drug, and requires the automatic  
        suspension or revocation of a California pharmacy license if an  
        out-of-state pharmacy's home state license is suspended or revoked.  

        Existing law:

        1) Provides for the practice of pharmacy and the licensing and  
           regulation of pharmacies and pharmacists by the Board of Pharmacy  
           (Board) within the Department of Consumer Affairs (DCA).  

        2) Authorizes the Board inspectors to inspect all pharmacies,  
           wholesalers, dispensaries, stores or places where drugs or devices  
           are compounded, prepared, furnished, dispensed or stored.   
           (Business and Professions Code (BPC) § 4008)

        3) 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.  (BPC § 4033) 

        4) Specifies that "manufacturer"  does not mean  : (Id.)

           a)   A pharmacy compounding a drug for parenteral therapy, pursuant  
             to a prescription.

           b)   A pharmacy that, at a patient's request, repackages a drug  
             previously dispensed to a patient, or to the patient's agent,  





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             pursuant to a prescription.  

        1) Specifies that "manufacturer"  means  :  (Id.)

           a)   A person who prepares, derives, manufactures, produces or  
             repackages a dangerous drug, as defined.   

           b)   A holder of or holders of a New Drug Application (NDA) and an  
             Abbreviated New Drug Application (ANDA) or a Biologics License  
             Application (BLA). 

           c)   A manufacturer's third-party logistics provider.

           d)   A private label distributor for whom the private label  
             distributor's prescription drugs are originally manufactured and  
             labeled for the distributor and have not been repackaged.

           e)   The distributor agent for the manufacturer, contract  
             manufacturer, or private label distributor, whether the  
             establishment is a member of the manufacturer's affiliated group  
             or is a contract distributor site.  

        5)Prohibits an out-of-state pharmacy from selling or distributing  
          dangerous drugs or devices in California through any other method  
          than a Board-licensed wholesaler, unless the out-of-state pharmacy  
          is licensed by the Board. (BPC § 4120)

        6)States that any pharmacy that contracts to compound a drug for  
          parenteral therapy, pursuant to a prescription, for delivery to  
          another pharmacy, must report that contractual arrangement to the  
          Board within 30 days of commencing that compounding.  (BPC § 4123)

        7)Requires the Board to adopt regulations establishing standards for  
          compounding injectable sterile drug products (sterile injectables)  
          in a pharmacy.  Clarifies that a pharmacy cannot compound sterile  
          injectables unless the pharmacy is licensed by the Board.  States  
          that a license to compound sterile injectables cannot be renewed  
          without a Board inspection.  Exempts pharmacies with accreditation  
          by the Joint Commission on Accreditation of Healthcare Organizations  
          or other accrediting agencies approved by the Board from these  
          requirements.  (BPC § 4127-4127.1) 

        8)Authorizes the Board to issue a cease and desist order to a pharmacy  
          compounding sterile injectables whenever the Board has reasonable  
          belief, based on information obtained through an investigation or  
          inspection, that there is an immediate threat to public health or  





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          safety.  (BPC § 4127.3)

        9)Allows a centralized hospital packaging pharmacy to prepare  
          medications for administration only to inpatients within its own  
          general acute care hospital, and one or more general acute care  
          hospitals, if the hospitals are under common ownership and located  
          within a 75-mile radius of each other.  Requires a centralized  
          hospital packaging pharmacy to obtain a specialty license from the  
          Board.  Authorizes a centralized hospital packaging pharmacy to:   
          prepare unit dose packages for single administration to inpatients  
          from bulk containers; prepare compounded unit dose drugs for  
          parenteral therapy for administration to inpatients; and, prepare  
          compounded unit dose drugs for administration to inpatients.   
          Authorizes a centralized hospital packaging pharmacy to prepare and  
          store a limited quantity of unit dose drugs prior to receiving a  
          patient-specific prescription according to certain circumstances.   
          Clarifies that all compounding functions shall only be performed in  
          the licensed centralized hospital pharmacy.  (BPC § 4128-4128.6)

        10)Grants the Board certain enforcement abilities against out-of-state  
          pharmacies, authorizes the Board to report actions against an  
          out-of-state pharmacy and authorizes the Board to take any action  
          against an out-of-state pharmacy that it would against a pharmacy in  
          this state if the grounds for action are also grounds for action in  
          the state in which the out-of-state pharmacy is permanently located.  
           (BPC § 4303)     

        
        This bill:

        1) Provides that a pharmacy licensed by the Board to compound  
           injectable sterile drug products in this state, or an out-of-state  
           pharmacy that compounds sterile drug products for shipment into the  
           state of California and licensed by the Board, which issues a  
           recall notice regarding a sterile compounded drug shall, in  
           addition to any other duties, contact the recipient pharmacy,  
           prescriber or patient of the recalled drug and the Board within 24  
           hours of the recall notice if both of the following apply:

           a)   Use or exposure to the recalled drug may cause serious adverse  
             health consequences or death.

           b)   The recalled drug was dispensed, or is intended for use, in  
             California.

        2)Provides that the recall notice shall be made according to the  





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          following:

           a)   If the recalled drug was dispensed directly to the patient,  
             the recall notice shall be made to the patient.

           b)   If the recalled drug product was dispensed directly to the  
             prescriber, the recall notice shall be made to the prescriber who  
             shall ensure the patient is notified.

           c)   If the recalled drug was dispensed directly to a pharmacy, the  
             notice shall be made to the pharmacy who shall notify the  
             prescriber or patient as appropriate.  If the pharmacy notifies  
             the prescriber, the prescriber shall ensure the patient is  
             notified.

        3)Provides that if the home state license of an out-of-state pharmacy  
          also licensed by the Board is revoked or suspended for any reason,  
          the license issued by the Board shall be immediately revoked or  
          suspended by operation of law.

        FISCAL EFFECT:  This measure has been keyed "fiscal" by Legislative  
        Counsel.  According to the Assembly Committee on Appropriations  
        analysis dated May 15, 2013, this bill will result in minor and  
        absorbable costs to the Board.

        COMMENTS:
        
        1. Purpose.  This bill is sponsored by the  Author  .  According to the  
           Author, AB 1045 protects patients from drugs made by compound  
           pharmacies that may cause serious adverse health consequences or  
           death by codifying the proper procedure to ensure patients are  
           safe.  
           
           According to information provided by the Author, California  
           requires pharmacies that compound sterile injectable drug products  
           to have a special license.  Currently, there are 
           286 licensed sterile injectable compounding pharmacies in  
           California, and 93 licensed sterile injectable compounding  
           pharmacies operating in another state.  The Author states that  
           California has some of the most comprehensive laws and regulations  
           for compounding pharmacies in the nation, and in the last decade,  
           the Board developed its own sterile injectable compounding  
           requirements, and created a licensing system for sterile injectable  
           compounding facilities in California and in other states.  

           The Author states that even with these protections, the recent New  





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           England Compounding Center (NECC) product contamination of 2012  
           affected California because California relies on the pharmacy's  
           home regulator, the Food and Drug Administration (FDA), and private  
           accreditors to certify safety in out-of-state pharmacies; none of  
           which acted after receiving multiple warnings. 

           Later on October 4, 2012, the Board issued a cease and desist order  
           to NECC following notice of the outbreak so NECC could no longer  
           ship products into the state. However, if the Board had the  
           authority, the Board would have also revoked or suspended the  
           California license, in addition to obtaining the cease and desist  
           order.  

        2. The Current Regulatory Framework.  Under the current regulatory  
           system, drug manufacturers are regulated by the federal Food and  
           Drug Administration (FDA).  Compounding organizations are regulated  
           by their respective states of residence.  Compounding organizations  
           also make drugs, but they are limited to producing small amounts in  
           response to a specific patient's prescription, or to create a small  
           supply for an identifiable patient population to ensure continuity  
           of treatment.  The state-by-state approach to regulating  
           compounding organizations yields inconsistent standards and varying  
           levels of enforcement on an industry that ships dangerous drugs  
           across state lines.

        3. New England Compounding Center: Outbreak of Fungal Meningitis:  In  
           October 2012, the New England Compounding Center (NECC), based in  
           Massachusetts, shipped contaminated product throughout the country,  
           including California, that resulted in the death of more than 40  
           people and 461 patients have become ill from the tainted steroid  
           injections.  

           NECC's compounding facility had obvious ongoing safety violations,  
           but continued to operate and ship products despite employee  
           whistleblower complaints to management.  The compounding facility  
           failed to maintain its clean room.  The air intake for the clean  
           room was contaminated and shared with the neighboring furniture  
           recycling facility, and employees discovered mold on various work  
           and storage surfaces several times per year.  Yet, NECC remained  
           accredited and was licensed to ship sterile compounded injectable  
           products into California.  

           Because California's Board had to rely on third party  
           accreditation, the Board asserts that it did not have the  
           opportunity or authority to inspect NECC or prevent NECC from  
           shipping products into California until patients in other states  





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           had already been harmed.

           NECC is not the only compounding pharmacy to have recently caused  
           significant patient harm.  In June 2012, a sterile injectable  
           pharmacy located in Florida shipped contaminated product into  
           California which resulted in significant patient harm, including  
           blindness in some cases.  According to the Board, it was again only  
           able to take protective actions after patient harm had already  
           occurred.

           The Author asserts that these events clearly demonstrate the need  
           to increase oversight of compounding pharmacies to ensure that  
           sterile drug products are safe for California consumers.



        4. FDA Oversight

           a)   The Federal Role in Inspecting Compounding Facilities:  The  
             FDA's oversight authority is limited, and according to the  
             agency, is not the right fit to provide appropriate and efficient  
             oversight of the growing compounding industry.   The FDA is  
             currently working with states to inspect certain state-licensed  
             pharmacies that produce sterile drug products that the FDA  
             believes may present the highest risk.  However, even during this  
             time of heightened awareness, FDA inspectors are being delayed in  
             their work or denied full access to records at some of the  
             facilities they are inspecting.

           b)   The Federal Response to NECC and Proposed Federal Regulation:   
             It is possible that regulation may occur at the federal level,  
             pre-empting state law on this issue.  The FDA has been working  
             with Congress to craft legislation authorizing increased federal  
             oversight of compounding pharmacies.  The FDA asserts that there  
             should be minimum federal standards for firms that compound  
             sterile drug products in advance of or without a prescription and  
             ship them interstate.  The FDA also wants clear authority to  
             proactively inspect pharmacies to determine the scope and nature  
             of their operations.  

        5. Recent Action by the Board - Compounding Regulations.  New  
           regulations governing compounding took effect last summer.   
           According to the Board, a Workgroup on Compounding was formed in  
           2004 comprised of board members, board staff and industry  
           representatives.  The workgroup recognized that current pharmacy  
           regulations addressing compounding only govern the physical  





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           circumstances, procedures and record keeping requirements for  
           general compounding and do not address quality, strength or purity.

           The Board adopted regulations in Article 7 of Division 17 of Title  
           16 of the California Code of Regulations (commencing with Section  
           1751) to implement provisions for pharmacies that compound sterile  
           injectable products as required in statute.  As there were no  
           similar provisions in regulation for general compounding, the Board  
           approved the addition of language that will establish parameters  
           and provide uniformity for pharmacies that carry out compounding in  
           general (including sterile injectable).  Pharmacies that compound  
           sterile injectable products must now go above and beyond the  
           requirements for compounding in general. 

           Subsequent to that workgroup activity, in response to patient  
           deaths and recalls due to contaminated compounded drugs, the Board  
           recently formed a Compounding Sub-Committee to address the issues  
           unique to effectively regulating compounding pharmacies located in  
           or shipping into this state.  The Sub-Committee's first meeting  
           occurred on March 15, 2013.  The Compounding Sub-Committee is  
           responsible for shaping the Board's future changes to its  
           regulations on compounding pharmacies.

        6. Related Legislation This Session.   SB 294  (Emmerson) requires an  
           inspection by the Board prior to licensure for all compounding  
           pharmacies that make or distribute compounded drugs in California.   
           Requires a compounding pharmacy to notify the Board within 24 hours  
           of initiating any recall, to provide a list of all drugs it  
           compounds to the Board, and to notify the Board of any discipline  
           or suspension of accreditation.  (  Status  :  The bill is pending in  
           the Assembly.)

        7. Prior Related Legislation.   AB 377  (Solario, Chapter 687, Statutes  
           of 2012) provides for centralized pharmacy packaging in a hospital,  
           allowing the pharmacy to be located outside of the hospital on  
           either the same premises or separate premises that is regulated  
           under a hospital's license.  Modifies the definition of  
           "manufacturer" so that the compounding that is done at a pharmacy  
           serving multiple hospitals does not inappropriately transform the  
           same compounding activities, that are now lawful at a hospital  
           pharmacy, into manufacturing activities which would be considered  
           as unlawful.
            
           AB 2779  (Solario) of 2010 would have set conditions for  
           reimbursement of a compounded drug under workers' compensation law  
           according to specified conditions, including a requirement that all  





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           active ingredients in the compounded drug are ingredients in drug  
           products that have been approved by the FDA and all other  
           ingredients are listed by the United States Pharmacopeia.  (  Status  :  
            The bill failed passage on the Senate Floor.)  

           AB 2077  (Solario) of 2010 was virtually identical to AB 377.   
           (  Status  :  This bill was vetoed by the Governor.  In his veto  
           message, the Governor expressed concern that the bill could result  
           in "a greater likelihood of product mix-up, loss of product  
           identity, contamination and cross-contamination, and lack of  
           adequate control systems.")  

           AB 1370  (Solario) of 2009 would have created a separate licensing  
           category for centralized hospital pharmacies.  (  Status  :  The bill  
           was held in the Assembly Committee on Business and Professions.)     
            
         
        8. Arguments in Support.  According to supporters, like the  Board of  
           Pharmacy  and the  California Senior Legislature  , this bill takes  
           preventive measure to ensure that patients are immediately notified  
           of any serious public health risks or safety recalls of drugs from  
           compounding pharmacies.  

        9. Suggested Author's Amendment.  Providing immediate and timely  
           notification to patients, pharmacies and providers when a  
           compounding pharmacy has received notice that one of their products  
           has been recalled, is an imperative aspect of consumer protection  
           and will ensure that patients take swift action in the event they  
           have come into contact with a recalled product.    

           The Committee suggests that the Author ensure that patients are  
           notified as soon as possible, no later than 12 hours of a recall  
           being activated, rather than the current 24 hour time frame as  
           outlined in the bill.

           On page 5, line 28, after "board, before "within", insert ", as  
           soon as possible,"

           On page 5, line 28, strike "24" and replace it with "12"

           (a) A pharmacy licensed pursuant to Section 4127.1 or 4127.2,  
           including a pharmacy that is exempt from licensure pursuant to  
           subdivision (d) of Section 4127.1 and subdivision (c) 
           of Section 4127.2, that issues a recall notice regarding a sterile  
           compounded drug shall, in addition to any other duties, contact the  
           recipient pharmacy, prescriber, or patient of the recalled drug and  





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           the board  , as soon as possible,  within  24   12  hours of the recall  
           notice if both of the following apply:
        
        10.Suggested Technical Amendments.  At the request of the Board, the  
           Author is amending the bill to include reference to a "cancelled  
           license" in another state as a trigger for the Board to also revoke  
           the California license of an out-of-state compounding pharmacy.

           On page 6, line 15, insert "cancel," after "may" and before "deny".  


           "The board may  cancel,  deny, revoke, or suspend a nonresident"

           On page 6, line 24, insert "cancelled," after "is" and before  
           "revoked".

           On page 6, line 26, insert "cancelled," before "revoked".

           "(c) If the home state pharmacy license of a nonresident
           pharmacy is  cancelled,  revoked or suspended for any reason, any  
           license
           issued pursuant to Section 4112 or 4127.2 shall be immediately
            cancelled,  revoked or suspended by operation of law."

        
        SUPPORT AND OPPOSITION:
        
         Support:  

        California Senior Legislature
        California Society of Health-System Pharmacists
        California State Board of Pharmacy

         Opposition:  

        None on file as of June 12, 2013.



        Consultant: Sarah Mason