BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 294| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 CONTINUED SB 294 Page 2 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 CONTINUED SB 294 Page 3 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 CONTINUED SB 294 Page 4 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 CONTINUED SB 294 Page 5 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. CONTINUED SB 294 Page 6 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. CONTINUED SB 294 Page 7 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. CONTINUED SB 294 Page 8 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 CONTINUED SB 294 Page 9 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 CONTINUED SB 294 Page 10 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. CONTINUED SB 294 Page 11 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, CONTINUED SB 294 Page 12 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 **** END **** CONTINUED