BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 809| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 809 Author: DeSaulnier (D) and Steinberg (D), et al. Amended: 5/24/13 Vote: 27 - Urgency SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 7-2, 4/15/13 AYES: Price, Block, Corbett, Galgiani, Hernandez, Hill, Padilla NOES: Emmerson, Wyland NO VOTE RECORDED: Yee SENATE GOVERNANCE & FINANCE COMMITTEE : 5-2, 5/8/13 AYES: Wolk, Beall, DeSaulnier, Hernandez, Liu NOES: Knight, Emmerson SENATE APPROPRIATIONS COMMITTEE : 5-1, 5/23/13 AYES: De León, Hill, Lara, Padilla, Steinberg NOES: Gaines NO VOTE RECORDED: Walters SUBJECT : Controlled substances: reporting SOURCE : Attorney General Kamala Harris DIGEST : This bill imposes an annual tax on Schedule II, III, and IV drug manufacturers, beginning on January 1, 2015; charges fees for prescribing health practitioners, dispensers and wholesalers of controlled substances; allows grant and gift moneys for the purposes of upgrading, maintain and enforcing the Controlled Substances Utilization Review and Evaluation System (CURES) program; requires the Medical Board of California (MBC) CONTINUED SB 809 Page 2 to periodically develop and disseminate to each licensed physician and surgeon and to each general acute care hospital in California information and educational materials relating to the assessment of a patient's risk of abusing or diverting controlled substances and information relating to CURES; and makes conforming changes. ANALYSIS : Existing law, under the Health and Safety Code, establishes the California Uniform Controlled Substances Act which regulates controlled substances. Existing law, under the Business and Professions Code: 1. Establishes various Acts which provide for the licensing, certification, and regulation of health practitioners by boards within the Department of Consumer Affairs (DCA). 2. Provides that a certified nurse-midwife or nurse practitioner may furnish or order drugs or devices, including controlled substances, in accordance with standardized procedures or protocols as specified. 3. Establishes the Pharmacy Law which provides for the licensure and regulation of pharmacies, pharmacists and wholesalers of dangerous drugs or devices by the Board of Pharmacy within the DCA. 4. Specifies certain requirements regarding the dispensing and furnishing of dangerous drugs and devices, and prohibits a person from furnishing any dangerous drug or device except upon the prescription of a physician, dentist, podiatrist, optometrist, veterinarian or naturopathic doctor. 5. Requires the MBC to periodically develop and disseminate information and educational materials regarding various subjects, including pain management techniques, to each licensed physician and surgeon and to each general acute care hospital in California. This bill: 1. States legislative findings and declarations relating to CURES: CONTINUED SB 809 Page 3 2. Requires the following health practitioner boards to additionally charge licensees under their supervision that are authorized to prescribe, order, administer, furnish, or dispense controlled substances a fee of up to 1.16% of the renewal fee that the license was subject to as of July 1, 2013, assessed annually. This fee is due and payable at the time the licensee renews his/her license and must be submitted with the licensee's renewal fee, and clarifies that in no case shall the fee exceed the reasonable costs associated with operating and maintaining CURES: MBC; Dental Board of California (DBC); Board of Pharmacy (BOP); Veterinary Medical Board (VMB); Board of Registered Nursing (BRN); Physician Assistant Committee of the MBC; Osteopathic Medical Board (OMB); Naturopathic Medicine Committee of the OMB; Board of Optometry (CBO); and the Board of Podiatric Medicine (BPM). 3. Requires the BOP to additionally charge fees for wholesalers and out-of-state wholesalers of dangerous drugs and veterinary food-animal drug retailers of up to 1.16% of the renewal fee that the wholesaler or nonresident wholesaler was subject to as of July 1, 2013, assessed annually. This fee is due and payable at the time the wholesaler or nonresident wholesaler renews its license and must be submitted with the wholesaler's or nonresident wholesaler's renewal fee. Clarifies that in no case shall this fee exceed the reasonable costs associated with operating and maintaining CURES. 4. Creates CURES accounts within the Contingent Fund of the MBC, the State Dentistry Fund, the BOP Contingent Fund, the VMB Contingent Fund, the BRN Fund, the Naturopathic Doctor's Fund, the OMB Contingent Fund, the CBO Fund, and the BPM Fund. Provides that the monies collected from licensing fees for CURES shall be deposited into the CURES account in each fund. 5. Provides that monies in the various CURES accounts shall be deposited into the CURES Fund, established within the State Treasury, consisting of all funds made available to DOJ to operate and maintain CURES. 6. Requires the MBC to periodically develop and disseminate information and education material regarding assessing a CONTINUED SB 809 Page 4 patient's risk of abusing or diverting controlled substances and information relating to CURES to each licensed physician and surgeon and to each general acute care hospital in this state. Requires MBC to consult with the Department of Health Care Services and DOJ in developing the materials, as specified. 7. Authorizes DOJ to seek and use grant funds to pay the costs incurred by the operation and maintenance of CURES; and requires DOJ to annually report to the Legislature and make available to the public the amount and sources of funds it receives for support of CURES. Prohibits grant funds from being appropriated from the MBC, the BOP Contingent Fund, the State Dentistry Fund, the BRN Fund, the Naturopathic Doctor's Fund, the OMB Contingent Fund, the VMB Contingent Fund, the CBO Fund, or the BPM Fund, for the purpose of funding CURES. 8. Provides that the operation of CURES must comply with all applicable federal and state privacy and security laws and regulations. 9. Allows DOJ to establish policies, procedures, and regulations regarding using, accessing, evaluating, managing, implementing, operating, storing, and securing the information within CURES. 10.Allows DOJ to invite stakeholders to assist, advise, and make recommendations on the establishment of rules and regulations necessary to ensure the proper administration and enforcement of the CURES database. All prescriber invitees must be licensed, as specified, in active practice in California, and a regular user of CURES. 11.Requires DOJ, prior to upgrading CURES, to consult with licensed prescribers, as specified, one or more of the identified regulatory boards or commissions, and any other stakeholder identified by DOJ for the purpose of identifying desirable capabilities and upgrades to the CURES PDMP. 12.Allows DOJ to establish a process to educate authorized subscribers of CURES on how to access and use CURES. 13.Requires a licensed health care practitioner eligible to prescribe Schedule II, III or IV controlled substances, or a CONTINUED SB 809 Page 5 pharmacist, to submit an application to participate in the CURES PDMP. Requires DOJ, upon approval of the practitioner or pharmacist subscriber, to release the electronic history of controlled substances dispensed to an individual under his/her care based on data contained in the CURES PDMP. Increases, from 10 to 30 days, the time in which an authorized subscriber must notify the DOJ of any changes to the subscriber account. Requires DOJ to notify applicants, the Secretary of State, the Secretary of the Senate, the Chief Clerk of the Assembly, and the Legislature when CURES is upgraded and can accommodate all users and include notification on the DOJ Web site, but not before June 1, 2015. 14.Establishes the CURES Tax Law with the following definitions: A. "Controlled substance" is a drug, substance or immediate precursor in Schedule II, Schedule III or Schedule IV. B. "Insurer" means an admitted insurer writing health insurance, as defined in Insurance Code (INS) Section 106, and an admitted insurer writing workers' compensation insurance, as defined in INS Section 109. C. "Qualified manufacturer" is a manufacturer of a controlled substance which is not a wholesaler or out-of-state wholesaler of dangerous drugs, a veterinary food-animal drug retailer or a licensee of any of the above-mentioned boards. D. "Health care service plan" as an entity licensed pursuant to the Knox-Keene Health Care Service Plan Act of 1975. 1. Allows DOJ to seek grant moneys from insurers and health care service plans for the purpose of supporting CURES. Insurers and health care service plans may contribute by submitting their payment to the State Controller which is then deposited in the CURES Fund. Requires DOJ to make information about the amount and source of all private grant funds received for CURES available to the public. A grant or gift made to the CURES Fund will be nondeductible for state CONTINUED SB 809 Page 6 tax purposes. 2. Imposes an annual tax, beginning on January 1, 2015, on all qualified manufacturers for the purpose of establishing and maintaining enforcement of CURES. 3. Requires the Board of Equalization (BOE) to collect the annual tax prescribed by this bill under the Fee Collection Procedures Law. 4. States that BOE shall not accept or consider a petition for redetermination or a claim for refund based on the assertion that a determination by DOJ (a) incorrectly determined that a qualified manufacturer is subject to the tax, or (b) improperly or erroneously calculated the amount of that tax. Requires BOE to forward to DOJ any appeal of a determination or any claim for a refund, as specified. 5. Requires DOJ to determine the annual tax by dividing the cost to establish and maintain enforcement of CURES by the number of qualified manufacturers. (For 2015, CURES cost shall be $4.2 million; beginning 2016, and each calendar year thereafter, DOJ shall adjust the rate annually to reflect increases/decreases in the cost-of-living during the prior fiscal year, as measured by the California Consumer Price Index for all items.) 6. Requires that DOJ provide to BOE the name and address of each qualified manufacturer liable for the annual tax, the amount of tax, and the due date. 7. Provides that all annual tax referred to BOE for collection, as specified, shall be paid to BOE. 8. Makes various technical and conforming changes. Background CURES 2.0 . DOJ is proposing a modernization program for CURES, CURES 2.0 which "seeks to quickly and efficiently serve the state's large medical practitioner community as well as meet the demanding analytical and information requirements of the criminal justice community." CONTINUED SB 809 Page 7 DOJ reports in "CURES 2.0: An Integrated Approach to Preventing Drug Abuse and Diversion" that the current CURES PDMP demands heavy personnel resources for information processing and dissemination. The system also requires the equivalent of seven Information Technology staff but is slow, frequently freezes and is not capable of accommodating a large influx of new users. The current registration process for the program is time intensive and requires manual data entry and work. DOJ also notes that the system is currently reactive in nature and has limited reporting and analytical capabilities, as well as underutilized, with only 3.6% of the eligible prescriber and pharmacist licensee field registered as users of CURES. The current system also has discrepancies between its two data sources that can result in unreliable information. A modernized system as outlined by DOJ will result in fewer staff required to maintain the PDMP as well as increased analytical capabilities for regulatory boards and law enforcement to investigate and prevent drug diversion. According to DOJ, CURES 2.0 will provide a streamlined program, system and enrollment process; integration with current major health information systems; timely Patient Activity Reports to prescribers and dispensers; inquiry capabilities to law enforcement and regulatory boards; and, a method of secure data exchange among PDMP users and DOJ. According to DOJ, the modernized PDMP will enhance information sharing about prescription drug dispensing and prescribing while "promoting legitimate medical practice and quality patient care" and implement two "newly created State of California Regional Investigative Prescription Teams (SCRIPT), a collaborative effort to significantly diminish the availability and use of illegally obtained prescription drugs through education, training and apprehending those responsible for the distribution and diversion of prescription drugs". The modernization effort would take approximately 12 to 16 months to complete once funding has been secured and system design efforts begin. The costs associated with CURES 2.0, as provided by DOJ, are as follows: ------------------------------------------------------- |PDMP Modernization One-Time Cost - Two Year Period | ------------------------------------------------------- |-------------------------------------------+-----------| CONTINUED SB 809 Page 8 |Item |Amount | |-------------------------------------------+-----------| |Hardware (Server, storage and network) |$520,541 | |-------------------------------------------+-----------| |Software (Licensing and maintenance) |$542,102 | |-------------------------------------------+-----------| |Design, Development, and Implementation |$1,032,000 | |(Consultant contract based on 4 contract | | |staff working an estimate of 8600 hours at | | |$120 per hour) | | |-------------------------------------------+-----------| |Estimated One-Time Cost |$2,090,643 | | | | ------------------------------------------------------- The $2,090,643 cost above would be for modernizing the PDMP to meet the needs of medical practitioners and law enforcement. ------------------------------------------------------- | Transitional System Cost - Two Year Period | ------------------------------------------------------- |-------------------------------------------+-----------| |System |Amount | |-------------------------------------------+-----------| | Information Technology Staff (7) |$1,300,000 | |-------------------------------------------+-----------| | Electronic Data Service (to obtain |$260,000 | | pharmacy data) | | |-------------------------------------------+-----------| | Maintenance (hardware, software) |$270,000 | |-------------------------------------------+-----------| |Estimated Cost to Operate System During |$1,830,000 | |Two Year Period: | | ------------------------------------------------------- The $1,830,000 cost identified above would be necessary to operate and maintain the current PDMP until data could be migrated to the modernized PDMP. This bill seeks to fund the modernization effort and transitional system through the proposed onetime tax assessment on health insurance plans and workers compensation insurers. CONTINUED SB 809 Page 9 ------------------------------------------------------- |CURES 2.0 Program and System Cost Ongoing - Year Three | | | ------------------------------------------------------- |-------------------------------------------+-----------| |Program |Amount | |-------------------------------------------+-----------| | CURES Support Staff (9) |$ 776,554 | |-------------------------------------------+-----------| | Travel/Training (system registration |$15,000 | | outreach; training system users; | | | stakeholder meetings) | | |-------------------------------------------+-----------| | System | | |-------------------------------------------+-----------| | Information Technology Staff (5) |$500,000 | |-------------------------------------------+-----------| | Electronic Data Service (to obtain |$130,000 | | pharmacy data) | | |-------------------------------------------+-----------| | Maintenance (hardware, software) |$200,000 | |-------------------------------------------+-----------| |Total: |$1,621,554 | | | | ------------------------------------------------------- The $1,621,554 cost identified above would be for staffing, operating, and maintaining the modernized PDMP on a yearly basis. This cost would include any necessary hardware and/or software upgrades. This bill seeks to fund this effort through the proposed 1.16% increase in licensing fees for prescribers, pharmacists and wholesalers. As proposed, this fee increase would result in approximately: $9 increase on the current $808 licensing fee for physicians and surgeons. $4 increase on the current $365 licensing fee for dentists. $2 increase on the current $150 licensing fee for pharmacists. $7 increase on the current $600 licensing fee for wholesalers, including out-of-state wholesalers. CONTINUED SB 809 Page 10 $5 increase on the current $405 licensing fee for veterinary retailers. $3 increase on the current $290 licensing fee for veterinarians. $2 increase on the current $140 licensing fee for nurse midwives. $2 increase on the current $140 licensing fee for nurse practitioners. $3 increase on the current $300 licensing fee for physician assistants. $5 increase on the current $400 licensing fee for osteopathic physicians and surgeons. $5 increase on the current $425 licensing fee for optometrists. $10 increase on the current $900 licensing fee for permanent doctors of podiatric medicine. ------------------------------------------------------- |Statewide SCRIPT Team | ------------------------------------------------------- |-------------------------------------------+----------| |Program - SCRIPT Team (19) |$ | | | 4,307,343| |-------------------------------------------+----------| |Total: |$ | | |4,307,343 | | | | ------------------------------------------------------ The $4,307,343 cost identified above would fund two SCRIPT, with one team located in Northern California and one in Southern California. These SCRIPT teams would be tasked with investigating prescription drug diversion, coordinating cases with the MBC, as well as the coordination of state, federal and local law enforcement efforts. These teams would provide CONTINUED SB 809 Page 11 statewide jurisdiction for cases involving organized diversion and the misuse of scheduled medication. This bill seeks to fund the SCRIPT teams through an annual tax levy on narcotic drug manufacturers who do business in this state. NOTE: For detailed information relating to the five Schedules of controlled substances, prescription drug abuse/deaths/monitoring, and CURES, refer to the Senate Business, Professions and Economic Development Committee's analysis. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee: One-time costs likely in the low millions for the BOE to set up billing and collection procedures, make information technology changes, and train staff (General Fund). Because these costs will be incurred before new tax revenues are collected, they will most likely be funded from the General Fund. Ongoing revenues from the tax imposed on certain drug manufacturers of $4.2 million per year (CURES Fund), beginning in 2015. Potential one-time costs in the hundreds of thousands for various professional regulating boards within DCA to revise regulations to increase existing fees (various special funds). Ongoing revenue increase of $800,000 from increases in various professional licensing fees (various special funds). One-time costs of about $4.6 million over two years to continue operation of the existing CURES system and develop an upgraded system by DOJ (CURES Fund). Ongoing costs of about $5.2 million per year to maintain the upgraded CURES and to support enforcement activities by DOJ (CURES Fund). SUPPORT : (Verified 5/28/13) CONTINUED SB 809 Page 12 Attorney General Kamala Harris (source) ALPHA Fund American Cancer Society Cancer Action Network Association of California Healthcare Districts Association of California Insurance Companies Behind the Orange Curtain, the Documentary California Association for Nurse Practitioners California Association of Joint Powers Authority California Chapter of the American College of Emergency Physicians California Coalition on Workers' Compensation California Department of Insurance California Joint Powers Insurance Authority California Labor Federation California Medical Association California Narcotic Officers Association California Pharmacists Association California Police Chiefs Association California Professional Association of Specialty Contractors California Retailers Association California Self-Insurers Association California Society of Health-System Pharmacists California State Association of Counties California State Board of Pharmacy California State Sheriffs' Association City and County of San Francisco County Alcohol and Drug Program Administrators Association of California CSAC Excess Insurance Authority Deputy Sheriffs' Association of San Diego County Employers Group Gallagher Bassett Services, Inc. Golden Oak Cooperative Corporation Grimmway Farms Health Officers Association of California Healthcare Distribution Management Association Independent Insurance Agents and Brokers of California Metro Risk Management Michael Sullivan & Associates National Association of Chain Drug Stores National Coalition Against Prescription Drug Abuse Nordstrom Safeway CONTINUED SB 809 Page 13 Schools Insurance Authority Schools Insurance Group Sedgwick Claims Management Services Shaw, Jacobsmeyer, Crain, and Claffey South Orange County Coalition Troy and Alana Pack Foundation University of California Western Occupational & Environmental Medical Association Western Propane Gas Association OPPOSITION : (Verified 5/24/13) BayBio BIOCOM California Healthcare Institute Endo Health Solutions, Inc. Generic Pharmaceutical Association Pharmaceutical Research and Manufacturers of America Teva Pharmaceuticals ARGUMENTS IN SUPPORT : According to the author's office, the automated PDMP within the CURES program is a valuable investigative, preventative, and educational tool for law enforcement, regulatory boards, and health care providers, but recent budget cuts to the Attorney General's Division of Law Enforcement have resulted in insufficient funding to support the CURES PDMP. The author's office states that the PDMP is necessary to ensure health care professionals have the necessary data to make informed treatment decisions and to allow law enforcement to investigate prescription drug diversion. Without a dedicated funding source, the CURES PDMP is not sustainable and will be suspended July 1, 2013. To keep the program going and increase its effectiveness, this bill establishes funds to upgrade the system to be fully modernized and provides dedicated ongoing funding to ensure the program is sustainable. The bill's sponsor, California Attorney General Kamala Harris (AG), notes that without the funding this bill provides, the AG will be forced to disband the CURES program later this year, making California one of only two states in the nation without a PDMP and that closing the CURES program would "exacerbate a prescription drug diversion problem that is already the fastest growing drug problem in the United States." CONTINUED SB 809 Page 14 According to the Healthcare Distribution Management Association, this bill outlines a fair and equitable approach to funding CURES. The group believes that PDMPs are worthwhile and can be effective in the fight against abuse of controlled substances and other prescription drugs. ARGUMENTS IN OPPOSITION : Pharmaceutical Research and Manufacturers of America (PhRMA) states that this bill creates an open-ended and permanent funding requirement on manufacturers to finance a "strike-team" to enforce California's anti-drug efforts. PhRMA supports the use of PDMPs and believes these and related enforcement programs should be funded with state General Fund dollars, federal grant monies or other fiscal resources rather than a tax on the industry. MW:k 5/28/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED