BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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          |SENATE RULES COMMITTEE            |                        SB 294|
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                                 UNFINISHED BUSINESS


          Bill No:  SB 294
          Author:   Emmerson (R)
          Amended:  9/3/13
          Vote:     21


           SENATE BUSINESS, PROF. & ECON. DEV. COMM.  :  10-0, 4/1/13
          AYES:  Price, Emmerson, Block, Corbett, Galgiani, Hernandez,  
            Hill, Padilla, Wyland, Yee

           SENATE APPROPRIATIONS COMMITTEE  :  7-0, 5/23/13
          AYES:  De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg

           SENATE FLOOR  :  39-0, 5/29/13
          AYES:  Anderson, Beall, Berryhill, Block, Calderon, Cannella,  
            Corbett, Correa, De León, DeSaulnier, Emmerson, Evans, Fuller,  
            Gaines, Galgiani, Hancock, Hernandez, Hill, Hueso, Huff,  
            Jackson, Knight, Lara, Leno, Lieu, Liu, Monning, Nielsen,  
            Padilla, Pavley, Price, Roth, Steinberg, Torres, Walters,  
            Wolk, Wright, Wyland, Yee
          NO VOTE RECORDED:  Vacancy

           ASSEMBLY FLOOR :  65-9, 9/9/13 - See last page for vote


           SUBJECT  :    Pharmacy:  sterile drug products

           SOURCE  :     California Board of Pharmacy


           DIGEST  :    This bill expands the types of sterile compounded  
          drugs for which a license is required, deletes the licensing  
          exemption for certain types of pharmacies, and requires  
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          inspection of nonresident sterile compounding pharmacies by the  
          Board of Pharmacy (BOP).

           Assembly Amendments  require the BOP to adopt regulations in  
          accordance with the Administrative Procedure Act to establish  
          policies, guidelines, and procedures to implement the provisions  
          of this bill; require the BOP to provide a report to the  
          Legislature, on or before January 1, 2018, regarding the  
          regulation of nonresident pharmacies; establishes a $780 fee for  
          the initial issuance and renewal of a nonresident sterile  
          license; deletes the sterile license exemption for specified  
          pharmacies; and makes other technical and conforming changes.

           ANALYSIS  :    

          Existing law:

          1.Provides for the practice of pharmacy and the licensing and  
            regulation of pharmacies and pharmacists by the BOP within the  
            Department of Consumer Affairs.

          2.Authorizes the BOP inspectors to inspect all pharmacies,  
            wholesalers, dispensaries, stores or places where drugs or  
            devices are compounded, prepared, furnished, dispensed or  
            stored.

          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.

          4.Prohibits an out-of-state pharmacy from selling or  
            distributing dangerous drugs or devices in California through  
            any other method than a BOP-licensed wholesaler, unless the  
            out-of-state pharmacy is licensed by the BOP.

          5.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 BOP within 30 days of commencing that compounding.

          6.Requires the BOP to adopt regulations establishing standards  
            for compounding injectable sterile drug products (sterile  
            injectables) in a pharmacy.  Clarifies that a pharmacy cannot  

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            compound sterile injectables unless the pharmacy is licensed  
            by the BOP.  States that a license to compound sterile  
            injectables cannot be renewed without a BOP inspection.   
            Exempts pharmacies with accreditation by the Joint Commission  
            on Accreditation of Healthcare Organizations or other  
            accrediting agencies approved by the BOP from these  
            requirements.
          7.Authorizes the BOP to issue a cease and desist order to a  
            pharmacy compounding sterile injectables whenever the BOP has  
            reasonable belief, based on information obtained through an  
            investigation or inspection, that there is an immediate threat  
            to public health or safety.

          8.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 BOP.  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.

          9.Grants the BOP certain enforcement abilities against  
            out-of-state pharmacies, authorizes the BOP to report actions  
            against an out-of-state pharmacy and authorizes the BOP 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.

          This bill:

          1.Requires BOP to adopt emergency regulations to establish  
            policies, guidelines, and procedures to initially implement  

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            the provisions of this bill that go into effect on July 1,  
            2014, as specified.

          2.States that the initial adoption, amendment, or repeal of a  
            regulation authorized by this bill is deemed to address an  
            emergency, as specified. 

          3.Permits BOP to request approval from the Office of  
            Administrative Law to readopt the regulation as an emergency  
            regulation, as specified, after the initial adoption,  
            amendment, or repeal of an emergency regulation pursuant to  
            this bill.

          4.Sunsets the provisions of 1 through 3 above, on July 1, 2014.

          5.Requires a pharmacy that compounds sterile drug products (SDP)  
            for injection, administration into the eye, or inhalation to  
            have a sterile compounding pharmacy license (sterile license).

          6.Requires BOP to adopt regulations to establish policies,  
            guidelines and procedures to implement this bill.

          7.Requires BOP to review any formal revision to General Chapter  
            797 of the United States Pharmacopeia and the National  
            Formulary, relating to the compounding of sterile  
            preparations, not later than 90 days after the revision  
            becomes official, to determine whether amendments are  
            necessary for the regulations adopted by BOP.

          8.Recasts "injectable sterile drug products" as SDP to include  
            compounded sterile drug products for administration into the  
            eye and for inhalation. 

          9.Deletes the sterile license exemption for pharmacies operated  
            by entities licensed by either BOP or the State Department of  
            Public Health and which have current accreditation from the  
            Joint Commission on Accreditation of Healthcare Organizations  
            or other private accreditation agencies approved by BOP. 

          10.Requires BOP to review the following prior to issuing or  
            renewing a sterile license: 

             A.   A current copy of the pharmacy's policies and procedures  
               for sterile compounding; and

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             B.   The pharmacy's self-assessment form, as specified. 

          1.Requires BOP to receive the following before issuing a sterile  
            drug license:

             A.   Copies of all inspection reports conducted of the  
               pharmacy's premises, and any reports from a private  
               accrediting agency conducted in the prior 12 months  
               documenting the pharmacy's operations; and

             B.   A list of all sterile medications compounded by the  
               pharmacy since the last license renewal.

          1.Requires a pharmacy with a sterile license to do the  
            following: 

             A.   Provide BOP a copy of any disciplinary or other action  
               taken by another state within 10 days of the action; 

             B.   Notify BOP within 10 days of the suspension of any  
               accreditation held by the pharmacy; 

             C.   Provide to BOP, within 12 hours, any recall notice  
               issued by the pharmacy for sterile drug products it has  
               compounded. 

          1.Requires that adverse effects reported and potentially  
            attributable to a pharmacy's sterile drug product to be  
            reported to BOP within 12 hours and immediately reported to  
            the MedWatch program of the federal Food and Drug  
            Administration (FDA). 

          2.Requires a nonresident pharmacy to obtain a sterile license  
            issued by BOP prior to compounding SDP for shipment into  
            California. 

          3.Deletes the provision exempting nonresident pharmacies from  
            needing a sterile license if the nonresident pharmacy is  
            operated by an entity licensed as a hospital, home health  
            agency, or a skilled nursing facility and has current  
            accreditation from the Joint Commission on Accreditation of  
            Healthcare Organizations, or other private accreditation  
            agencies approved by BOP. 

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          4.Requires a nonresident pharmacy to be inspected by BOP and  
            found in compliance with this bill and any related regulations  
            prior to receiving a sterile license. 

          5.Requires the nonresident pharmacy to reimburse BOP for all  
            actual and necessary costs incurred by BOP in conducting an  
            inspection of the pharmacy at least once annually, as  
            specified.

          6.Requires BOP to review the nonresident pharmacy's completed  
            self-assessment form, as specified, prior to issuing a sterile  
            license.

          7.Requires BOP to be provided with copies of all inspection  
            reports conducted of the nonresident pharmacy's premises in  
            the last 12 months documenting the pharmacy's operations. 

          8.Requires BOP to receive a list of all sterile drug products  
            compounded by the nonresident pharmacy in the prior 12 months.  


          9.Requires a nonresident pharmacy with a sterile license to do  
            the following: 

             A.   Provide to BOP a copy of any disciplinary or other  
               action taken by its state of residence or another state  
               within 10 days of the action. 

             B.   Notify BOP within 10 days of the suspension of any  
               accreditation held by the pharmacy.

             C.   Provide to BOP, within 12 hours, any recall notice  
               issued by the pharmacy for sterile drug products it has  
               compounded that have been shipped into, or dispensed in,  
               California. 

             D.   Advise BOP of any complaint it receives from a provider,  
               pharmacy, or patient in California. 

          1.Requires any adverse effects reported or potentially  
            attributable to a nonresident pharmacy's SDP to be reported to  
            BOP within 24 hours and immediately reported to the MedWatch  
            program of the federal FDA. 

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          2.Requires BOP to provide a report to the Legislature regarding  
            the regulation of nonresident pharmacies by January 1, 2018,  
            that provides, at minimum, the following: 

             A.   A detailed description of BOP activities related to the  
               inspection and licensure of nonresident pharmacies; 

             B.   Whether fees and travel costs collected provide revenue  
               in an amount sufficient to support BOP's inspection and  
               licensure of nonresident pharmacies; 

             C.   The status of proposed changes to federal law that are  
               serious consideration and that would govern compounding  
               pharmacies, including legislation pending before the United  
               States Congress, administrative rules, regulations, or  
               orders under consideration by the federal FDA or other  
               appropriate federal agency, and cases pending before the  
               courts; 

             D.   If applicable, recommended modifications to BOP's  
               statutory duties related to nonresident pharmacies as a  
               result of changes to federal law or any additional  
               modifications necessary to protect the health and safety of  
               the public. 

          1.Establishes a fee of $780 for the initial issuance and renewal  
            of a nonresident sterile license. 

          2.Requires a nonresident pharmacy to pay, in addition to an  
            application or application renewal fee, a reasonable amount as  
            determined by BOP necessary to cover BOP's estimated cost of  
            performing a licensing inspection. 

          3.States that failure to submit the inspection deposit at the  
            time of application or renewal will cause the application to  
            be deemed incomplete. 

          4.Requires BOP to provide a written invoice to the applicant for  
            any difference between the inspection deposit and the actual  
            costs of inspection, and prohibits BOP from taking action on  
            the application or renewal until the full amount has been paid  
            to BOP.


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          5.Requires BOP to remit the difference to the applicant if the  
            applicant paid more than the actual and necessary costs  
            incurred for the inspection. 

          6.Makes the provisions of this bill generally operative on July  
            1, 2014, and makes inoperative conflicting provisions of law  
            on July 1, 2014, and repeals those sections on January 1,  
            2015. 

          7.Makes technical and clarifying amendments. 

           Background
           
           Current regulatory framework  .  Under the current regulatory  
          system, drug manufacturers are regulated by the 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.

           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 becoming 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 BOP had to rely on third-party  
          accreditation, the BOP asserts that it did not have the  
          opportunity or authority to inspect NECC or prevent NECC from  

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          shipping products into California until patients in other states  
          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 BOP,  
          it was again only able to take protective actions after patient  
          harm had already occurred.

           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.

           Recent action by the BOP - compounding regulations  .  New  
          regulations governing compounding took effect last Summer.   
          According to the BOP, 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  
          circumstances, procedures and record keeping requirements for  
          general compounding and do not address quality, strength or  
          purity.

          The BOP adopted regulations 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 BOP 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 BOP  

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          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 Sub-Committee is  
          responsible for shaping the BOP's future changes to its  
          regulations on compounding pharmacies.

           Comments
           
          According to the author, "Because current law allows for  
          accreditation in lieu of licensure, the BOP lacks the ability to  
          appropriately regulate such entities and in the case of sterile  
          compounding pharmacies, even the ability to inspect such  
          facilities to ensure compliance with pharmacy law.  Therefore,  
          SB 294 will require licensure by the BOP and will expressly  
          authorize the BOP to conduct inspections of facilities that are  
          licensed to dispense or ship compounded products into  
          California.  By doing so, this will ensure consistent oversight  
          of these pharmacies and increase consumer protection." 

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

          According to the Assembly Appropriations Committee: 

           One-time costs of $50,000 to the BOP (Pharmacy Board  
            Contingent Fund) for regulations and development of  
            reimbursement protocols for out-of-state pharmacies.

           Approximately $1.2 million in costs to BOP annually (Pharmacy  
            Board Contingent Fund) to inspect and license approximately  
            700 new in-state pharmacies and 250 total nonresident sterile  
            compounding pharmacies.

           This estimate includes approximately 100 nonresident  
            pharmacies that are currently licensed by BOP but not  
            inspected.  BOP currently relies on third-party accreditation  
            reports or licensing inspections from other states for  
            nonresident pharmacies.  Additionally, the removal of  
            exemptions from licensure for pharmacies accredited by  
            third-party entities will require BOP to inspect and license a  
            much larger number of pharmacies than they do under existing  
            law.


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           Annual revenues of $1.2 million (Pharmacy Board Contingent  
            Fund), including additional licensure fee revenues of  
            approximately $650,000 and $550,000 in reimbursements to BOP  
            for travel and inspection costs for nonresident pharmacies.   
            This estimate assumes travel and inspection costs are  
            reimbursed at an average of $3,500 per licensed nonresident  
            pharmacy.  If actual reimbursements are lower than assumed,  
            revenues will be insufficient to fully cover the expected  
            workload.

           SUPPORT  :   (Verified  9/10/13)

          California State Board of Pharmacy (source)
          California Optometric Association
          California Pharmacists Association
          California Society of Health System Pharmacists
          Health Officers Association of California

           ARGUMENTS IN SUPPORT  :    According to the bill's sponsor, the  
          California BOP of Pharmacy wants to strengthen state oversight  
          of pharmacies that compound sterile drugs, including  
                                                     out-of-state pharmacies, to protect consumers from tainted  
          compounded substances.  The BOP currently cannot inspect  
          out-of-state compounding pharmacies prior to issuing a license.   
          The BOP believes that requiring out-of-state pharmacies to  
          submit to and pay for a BOP inspection will allow the BOP to  
          ensure that every pharmacy that distributes sterile compounded  
          drugs into California meets the same uniform standards.

          The California Pharmacists Association (CPA) states that in  
          light of the NECC tragedy, California should no longer rely on  
          other states or entities to inspect and accredit out-of-state  
          compounding pharmacies.  According to CPA, California consumers  
          will be better protected by holding out-of-state pharmacies to  
          the same strict standards the BOP has held in-state compounding  
          pharmacies to for the past decade.

           ASSEMBLY FLOOR  :  65-9, 9/9/13
          AYES:  Achadjian, Alejo, Ammiano, Atkins, Bloom, Bocanegra,  
            Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon,  
            Campos, Chau, Chávez, Chesbro, Cooley, Daly, Dickinson,  
            Eggman, Fong, Frazier, Beth Gaines, Garcia, Gatto, Gomez,  
            Gonzalez, Gordon, Gorell, Gray, Hagman, Hall, Harkey, Roger  
            Hernández, Holden, Jones-Sawyer, Levine, Linder, Logue,  

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            Lowenthal, Mansoor, Medina, Mitchell, Mullin, Muratsuchi,  
            Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel  
            Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone,  
            Ting, Wagner, Weber, Wieckowski, Williams, Yamada, John A.  
            Pérez
          NOES:  Allen, Bigelow, Dahle, Donnelly, Grove, Jones,  
            Maienschein, Morrell, Wilk
          NO VOTE RECORDED:  Conway, Fox, Melendez, Waldron, Vacancy,  
            Vacancy


          MW:ej  9/10/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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