Amended in Senate April 6, 2015

Senate Bill No. 619

Introduced by Senator Morrell

(Coauthor: Senator Stone)

February 27, 2015

begin delete An act to amend Section 14105.455 of the Welfare and Institutions Code, relating to Medi-Cal. end delete begin insert An act to amend Section 4400 of, to add Section 4034 to, and to add Article 7.7 (commencing with Section 4129) to Chapter 9 of Division 2 of, the Business and Professions Code, relating to pharmacy, and making an appropriation therefor. end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 619, as amended, Morrell. begin delete Medi-Cal. end delete begin insert Pharmacy: outsourcing facilities: licensure. end insert

begin insert

Existing law, the Pharmacy Law, provides for the licensure and regulation of pharmacists and pharmacy corporations in this state by the California State Board of Pharmacy. The law prohibits a pharmacy from compounding sterile drug products unless the pharmacy has obtained a sterile compounding pharmacy license from the board, and prohibits the board from issuing or renewing that license until the board has, among other things, reviewed a current copy of the pharmacy’s procedures and policies for sterile compounding. Existing law provides that fees collected on behalf of the board are credited to the Pharmacy Board Contingent Fund, a continuously appropriated fund.

end insert begin insert

This bill would require the board to license an outsourcing facility, as defined, and would prohibit an outsourcing facility to be concurrently licensed with the board as a sterile compounding pharmacy at the same location. The bill would require an outsourcing facility to be licensed with the board before doing business within or into the state, and would require an outsourcing facility to, among other things, notify the board of any disciplinary or other action taken by another state or the federal Food and Drug Administration within 10 days of the action. The bill would require the board to, among other things, inspect the location of an outsourcing facility to ensure that the outsourcing facility is in compliance with all laws and regulations before issuing or renewing an outsourcing facility’s license. The bill would make a violation of any of these provisions or regulations adopted thereto punishable by a fine of up to $5,000 per occurrence. The bill would, on or after January 1, 2018, require the board to provide a report, as specified, to the Legislature regarding the regulation of nonresident outsourcing facilities. The bill would also authorize the board to collect a fee of $780 for the issuance and renewal of an outsourcing license and a fee of $715 for a temporary license, as specified. By increasing the amount of money deposited into a continuously appropriated fund, the bill would make an appropriation.

end insert begin delete

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services, under which qualified low-income individuals receive health care services, including pharmacy services and drugs. Existing law requires pharmacy providers to submit their usual and customary charge when billing the Medi-Cal program for prescribed drugs.

end delete begin delete

This bill would make a technical, nonsubstantive change to that provision.

end delete

Vote: majority. Appropriation:  begin delete no end delete begin insert yes end insert . Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 4034 is added to the end insert begin insert Business and
Professions Code end insert begin insert , to read: end insert

begin insert

begin insert 4034. end insert   

“Outsourcing facility” means a facility that meets all of
the following:

(a) Is located within the United States of America at one address
that is engaged in the compounding of sterile drugs and nonsterile
drugs.

(b) Has registered as an outsourcing facility with the federal
Food and Drug Administration under Section 503B of the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 353b).

(c) Is doing business within or into California.

(d) Is licensed with the board as an outsourcing facility.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Article 7.7 (commencing with Section 4129) is added
to Chapter 9 of Division 2 of the end insert begin insert Business and Professions Code end insert begin insert ,
to read: end insert

begin insert

 

Article begin insert 7.7. end insert   Outsourcing Facilities

 

begin insert 4129. end insert   

(a) An entity licensed as an outsourcing facility with
the federal Food and Drug Administration (FDA) shall be
concurrently licensed with the board as an outsourcing facility if
it compounds sterile medication or nonsterile medication for
patients or practitioners within or into California. A product
compounded by an outsourcing facility shall be distributed without
a patient-specific prescription.

(b) A facility premises licensed with the board as a sterile
compounding pharmacy shall not be concurrently licensed with
the board as an outsourcing facility at the same location. A sterile
compounding pharmacy compounds and dispenses pursuant to a
prescription.

(c) The board may adopt regulations in accordance with the
Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) to establish policies, guidelines, and procedures to
implement this article.

(d) The board shall review any formal requirements or guidance
documents developed by the FDA regarding outsourcing facilities
within 90 days after the release in order to determine whether
revisions are necessary for any regulations.

(e) An outsourcing facility licensed by the board shall not
perform the duties of a pharmacy, such as filling individual
prescriptions for individual patients, within the outsourcing facility.
Patient-specific compounding shall be performed only by a licensed
pharmacy. An outsourcing facility shall not be located in the same
licensed premises as a pharmacy.

begin insert 4129.1. end insert   

(a) An outsourcing facility that is licensed with the
FDA and with an address in this state shall also be licensed by
the board as an outsourcing facility before doing business within
or into this state. The license shall be renewed annually and is not
transferable.

(b) An outsourcing facility shall compound all sterile products
and nonsterile products in compliance with current federal good
manufacturing practices.

(c) An outsourcing facility license shall not be issued or renewed
until the location is inspected by the board and found in compliance
with this article and regulations adopted by the board.

(d) An outsourcing facility license shall not be issued or renewed
until the board does all of the following:

(1) Reviews a current copy of the outsourcing facility’s policies
and procedures for sterile compounding and nonsterile
compounding.

(2) Is provided with copies of all inspection reports of the
outsourcing facility’s premises conducted in the prior 12 months.

(3) Receives a list of all sterile drugs and nonsterile drugs
compounded by the outsourcing facility as reported to the FDA in
the last 12 months.

(e) An outsourcing facility licensed pursuant to this section shall
provide the board with all of the following:

(1) A copy of any disciplinary or other action taken by another
state or the FDA within 10 days of the action.

(2) Notice within 24 hours of any recall notice issued by the
outsourcing facility.

(3) Notice within 24 hours after learning of adverse effects
reported or potentially attributable to an outsourcing facility’s
products.

begin insert 4129.2. end insert   

(a) An outsourcing facility that is licensed with the
FDA as an outsourcing facility and has an address outside of this
state but in the United States of America is a nonresident
outsourcing facility. A nonresident outsourcing facility shall not
compound sterile drug products or nonsterile drug products for
shipment into this state without an outsourcing license issued by
the board pursuant to this section. The license shall be renewed
annually and shall not be transferable.

(b) A nonresident outsourcing facility shall compound all sterile
products and nonsterile products in compliance with current
federal good manufacturing practices.

(c) A license for a nonresident outsourcing facility shall not be
issued or renewed until the location is inspected by the board and
found in compliance with this article and any regulations adopted
by the board. The nonresident outsourcing facility shall reimburse
the board for all actual and necessary costs incurred by the board
in conducting an inspection of the nonresident outsourcing facility
at least once annually pursuant to subdivision (x) of Section 4400.

(d) A license for a nonresident outsourcing facility shall not be
issued or renewed until the board:

(1) Reviews a current copy of the nonresident outsourcing
facility’s policies and procedures for sterile compounding and
nonsterile compounding.

(2) Is provided with copies of all inspection reports of the
nonresident outsourcing facility’s premises conducted in the prior
12 months.

(3) Receives a list of all sterile drug products and nonsterile
drug products compounded by the pharmacy as reported to the
FDA within the prior 12 months.

(e) A nonresident outsourcing facility licensed pursuant to this
section shall do all of the following:

(1) Provide the board with a copy of any disciplinary or other
action taken by another state or the FDA within 10 days of the
action.

(2) Provide the board notice within 24 hours of any recall notice
issued by the nonresident outsourcing facility.

(3) Advise the board of any complaint it receives from a
provider, pharmacy, or patient in California.

(f) A nonresident outsourcing facility shall provide to the board
notice within 24 hours after learning of adverse effects reported
or potentially attributable to a nonresident outsourcing facility’s
products.

begin insert 4129.3. end insert   

(a) On or before January 1, 2018, the board shall
provide a report to the Legislature regarding the regulation of
nonresident outsourcing facilities. The report shall be submitted
to the Legislature in the manner required pursuant to Section 9795
of the Government Code. At a minimum, the report shall address
all of the following:

(1) A detailed description of board activities related to the
inspection and licensure of nonresident outsourcing facilities.

(2) Whether fee revenue collected pursuant to subdivision (x)
of Section 4400 and travel cost reimbursements collected pursuant
to subdivision (c) of Section 4129.2 provide revenue in an amount
sufficient to support the board’s activities related to the inspection
and licensure of nonresident outsourcing facilities.

(3) The status of proposed changes to federal law that are under
serious consideration and that would govern outsourcing facilities
and compounding pharmacies, including, but not limited to,
legislation pending before Congress, administrative rules,
regulations, or orders under consideration by the FDA or other
appropriate federal agency, and cases pending before the courts.

(4) If applicable, recommended modifications to the board’s
statutory duties related to nonresident outsourcing facilities as a
result of changes to federal law or any additional modifications
necessary to protect the health and safety of the public.

(b) The requirement for submitting a report imposed under
subdivision (a) is inoperative on January 1, 2022, pursuant to
Section 10231.5 of the Government Code.

begin insert 4129.4. end insert   

(a) Whenever the board has a reasonable belief, based
on information obtained during an inspection or investigation by
the board, that an outsourcing facility compounding sterile drug
products or nonsterile drug products poses an immediate threat
to the public health or safety, the executive officer of the board
may issue an order to the outsourcing facility to immediately cease
and desist compounding sterile drug products or nonsterile drug
products. The cease and desist order shall remain in effect for no
more than 30 days or the date of a hearing seeking an interim
suspension order, whichever is earlier.

(b) Whenever the board issues a cease and desist order pursuant
to subdivision (a), the board shall immediately issue a notice to
the owner setting forth the acts or omissions with which the owner
is charged, specifying the pertinent code section or sections.

(c) The cease and desist order shall state that the owner, within
15 days of receipt of the notice, may request a hearing before the
president of the board to contest the cease and desist order.
Consideration of the owner’s contest of the cease and desist order
shall comply with the requirements of Section 11425.10 of the
Government Code. The hearing shall be held no later than five
days after the date the request of the owner is received by the
board. The president shall render a written decision within five
days after the hearing. In the absence of the president of the board,
the vice president of the board may conduct the hearing permitted
by this subdivision. Review of the decision may be sought by the
owner or person in possession or control of the outsourcing facility
pursuant to Section 1094.5 of the Code of Civil Procedure.

(d) Failure to comply with a cease and desist order issued
pursuant to this section is unprofessional conduct.

begin insert 4129.5. end insert   

Notwithstanding any other law, a violation of this
article, or regulation adopted pursuant thereto, may subject the
person or entity that committed the violation to a fine of up to five
thousand dollars ($5,000) per occurrence pursuant to a citation
issued by the board.

begin insert 4129.6. end insert   

For purposes of this article, “sterile compounded
products” means compounded preparations for injection
administration into the eye, or inhalation.

begin insert 4129.8. end insert   

The board, at its discretion, may issue a temporary
license to an outsourcing facility when the ownership of the
outsourcing facility is transferred from one person to another,
upon the conditions and for any periods of time as the board
determines to be in the public interest. A temporary license fee
shall be required as specified in subdivision (w) of Section 4400.
When needed to protect public safety, a temporary license may be
issued for a period not to exceed 180 days, and may be issued
subject to terms and conditions the board deems necessary. If the
board determines a temporary license was issued by mistake or
denies the application for a permanent license, the temporary
license shall terminate upon the earlier of personal service of the
notice of termination upon the licenseholder or service by certified
mail with return receipt requested at the licenseholder’s address
of record with the board. The temporary licenseholder shall not
be deemed to have a vested property right or interest in the license
for purposes of retaining a temporary license or for purposes of
any disciplinary or license denial proceeding before the board.

begin insert 4129.9. end insert   

(a) An outsourcing facility licensed pursuant to Section
4129.1 or 4129.2 that issues a recall notice for a sterile drug or
nonsterile drug compounded by the outsourcing facility, in addition
to any other duties, shall contact the recipient pharmacy,
prescriber, or patient of the recalled drug and the board as soon
as possible within 24 hours of the recall notice if both of the
following apply:

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

(2) The recalled drug was dispensed, or is intended for use, in
this state.

(b) A recall notice issued pursuant to subdivision (a) shall be
made as follows:

(1) If the recalled drug was dispensed directly to the prescriber,
the notice shall be made to the prescriber and the prescriber shall
ensure the patient is notified.

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

end insert

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 4400 of the end insert begin insert Business and Professions Code end insert begin insert is
amended to read: end insert

4400.  

The amount of fees and penalties prescribed by this
chapter, except as otherwise provided, is that fixed by the board
according to the following schedule:

(a) The fee for a nongovernmental pharmacy license shall be
four hundred dollars ($400) and may be increased to five hundred
twenty dollars ($520). The fee for the issuance of a temporary
nongovernmental pharmacy permit shall be two hundred fifty
dollars ($250) and may be increased to three hundred twenty-five
dollars ($325).

(b) The fee for a nongovernmental pharmacy license annual
renewal shall be two hundred fifty dollars ($250) and may be
increased to three hundred twenty-five dollars ($325).

(c) The fee for the pharmacist application and examination shall
be two hundred dollars ($200) and may be increased to two
hundred sixty dollars ($260).

(d) The fee for regrading an examination shall be ninety dollars
($90) and may be increased to one hundred fifteen dollars ($115).
If an error in grading is found and the applicant passes the
examination, the regrading fee shall be refunded.

(e) The fee for a pharmacist license and biennial renewal shall
be one hundred fifty dollars ($150) and may be increased to one
hundred ninety-five dollars ($195).

(f) The fee for a nongovernmental wholesaler or third-party
logistics provider license and annual renewal shall be seven
hundred eighty dollars ($780) and may be decreased to no less
than six hundred dollars ($600). The application fee for any
additional location after licensure of the first 20 locations shall be
three hundred dollars ($300) and may be decreased to no less than
two hundred twenty-five dollars ($225). A temporary license fee
shall be seven hundred fifteen dollars ($715) and may be decreased
to no less than five hundred fifty dollars ($550).

(g) The fee for a hypodermic license and renewal shall be one
hundred twenty-five dollars ($125) and may be increased to one
hundred sixty-five dollars ($165).

(h) (1) The fee for application, investigation, and issuance of
a license as a designated representative pursuant to Section 4053,
or as a designated representative-3PL pursuant to Section 4053.1,
shall be three hundred thirty dollars ($330) and may be decreased
to no less than two hundred fifty-five dollars ($255).

(2) The fee for the annual renewal of a license as a designated
representative or designated representative-3PL shall be one
hundred ninety-five dollars ($195) and may be decreased to no
less than one hundred fifty dollars ($150).

(i) (1) The fee for the application, investigation, and issuance
of a license as a designated representative for a veterinary
food-animal drug retailer pursuant to Section 4053 shall be three
hundred thirty dollars ($330) and may be decreased to no less than
two hundred fifty-five dollars ($255).

(2) The fee for the annual renewal of a license as a designated
representative for a veterinary food-animal drug retailer shall be
one hundred ninety-five dollars ($195) and may be decreased to
no less than one hundred fifty dollars ($150).

(j) (1) The application fee for a nonresident wholesaler or
third-party logistics provider license issued pursuant to Section
4161 shall be seven hundred eighty dollars ($780) and may be
decreased to no less than six hundred dollars ($600).

(2) For nonresident wholesalers or third-party logistics providers
that have 21 or more facilities operating nationwide the application
fees for the first 20 locations shall be seven hundred eighty dollars
($780) and may be decreased to no less than six hundred dollars
($600). The application fee for any additional location after
licensure of the first 20 locations shall be three hundred dollars
($300) and may be decreased to no less than two hundred
twenty-five dollars ($225). A temporary license fee shall be seven
hundred fifteen dollars ($715) and may be decreased to no less
than five hundred fifty dollars ($550).

(3) The annual renewal fee for a nonresident wholesaler license
or third-party logistics provider license issued pursuant to Section
4161 shall be seven hundred eighty dollars ($780) and may be
decreased to no less than six hundred dollars ($600).

(k) The fee for evaluation of continuing education courses for
accreditation shall be set by the board at an amount not to exceed
forty dollars ($40) per course hour.

(l) The fee for an intern pharmacist license shall be ninety dollars
($90) and may be increased to one hundred fifteen dollars ($115).
The fee for transfer of intern hours or verification of licensure to
another state shall be twenty-five dollars ($25) and may be
increased to thirty dollars ($30).

(m) The board may waive or refund the additional fee for the
issuance of a license where the license is issued less than 45 days
before the next regular renewal date.

(n) The fee for the reissuance of any license, or renewal thereof,
that has been lost or destroyed or reissued due to a name change
shall be thirty-five dollars ($35) and may be increased to forty-five
dollars ($45).

(o) The fee for the reissuance of any license, or renewal thereof,
that must be reissued because of a change in the information, shall
be one hundred dollars ($100) and may be increased to one hundred
thirty dollars ($130).

(p) It is the intent of the Legislature that, in setting fees pursuant
to this section, the board shall seek to maintain a reserve in the
Pharmacy Board Contingent Fund equal to approximately one
year’s operating expenditures.

(q) The fee for any applicant for a nongovernmental clinic
license shall be four hundred dollars ($400) and may be increased
to five hundred twenty dollars ($520) for each license. The annual
fee for renewal of the license shall be two hundred fifty dollars
($250) and may be increased to three hundred twenty-five dollars
($325) for each license.

(r) The fee for the issuance of a pharmacy technician license
shall be eighty dollars ($80) and may be increased to one hundred
five dollars ($105). The fee for renewal of a pharmacy technician
license shall be one hundred dollars ($100) and may be increased
to one hundred thirty dollars ($130).

(s) The fee for a veterinary food-animal drug retailer license
shall be four hundred five dollars ($405) and may be increased to
four hundred twenty-five dollars ($425). The annual renewal fee
for a veterinary food-animal drug retailer license shall be two
hundred fifty dollars ($250) and may be increased to three hundred
twenty-five dollars ($325).

(t) The fee for issuance of a retired license pursuant to Section
4200.5 shall be thirty-five dollars ($35) and may be increased to
forty-five dollars ($45).

(u) The fee for issuance or renewal of a nongovernmental sterile
compounding pharmacy license shall be six hundred dollars ($600)
and may be increased to seven hundred eighty dollars ($780). The
fee for a temporary license shall be five hundred fifty dollars ($550)
and may be increased to seven hundred fifteen dollars ($715).

(v) The fee for the issuance or renewal of a nonresident sterile
compounding pharmacy license shall be seven hundred eighty
dollars ($780). In addition to paying that application fee, the
nonresident sterile compounding pharmacy shall deposit, when
submitting the application, a reasonable amount, as determined by
the board, necessary to cover the board’s estimated cost of
performing the inspection required by Section 4127.2. If the
required deposit is not submitted with the application, the
application shall be deemed to be incomplete. If the actual cost of
the inspection exceeds the amount deposited, the board shall
provide to the applicant a written invoice for the remaining amount
and shall not take action on the application until the full amount
has been paid to the board. If the amount deposited exceeds the
amount of actual and necessary costs incurred, the board shall
remit the difference to the applicant.

begin delete

(w) This section shall become operative on July 1, 2014.

end delete begin insert

(w) The fee for issuance or renewal of a nongovernmental
outsourcing facility license shall be seven hundred eighty dollars
($780). The fee for a temporary outsourcing facility license shall
be seven hundred fifteen dollars ($715).

end insert begin insert

(x) The fee for the issuance or renewal of a nonresident
outsourcing facility license shall be seven hundred eighty dollars
($780). In addition to paying that application fee, the nonresident
outsourcing facility shall deposit, when submitting the application,
a reasonable amount, as determined by the board, necessary to
cover the board’s estimated cost of performing the inspection
required by Section 4129.2. If the required deposit is not submitted
with the application, the application shall be deemed to be
incomplete. If the actual cost of the inspection exceeds the amount
deposited, the board shall provide to the applicant a written invoice
for the remaining amount and shall not take action on the
application until the full amount has been paid to the board. If the
amount deposited exceeds the amount of actual and necessary
costs incurred, the board shall remit the difference to the applicant.

end insert

begin delete

SECTION 1.  

Section 14105.455 of the Welfare and Institutions
Code is amended to read:

14105.455.  

(a) Pharmacy providers shall submit their usual
and customary charge when billing the Medi-Cal program for
prescribed drugs.

(b) “Usual and customary charge” means the lower of either of
the following:

(1) The lowest price reimbursed to the pharmacy by other
third-party payers in California, excluding Medi-Cal managed care
plans and Medicare Part D prescription drug plans.

(2) The lowest price routinely offered to any segment of the
general public.

(c) Donations or discounts provided to a charitable organization
are not considered usual and customary charges.

(d) Pharmacy providers shall keep and maintain records of their
usual and customary charges for a period of three years from the
date the service was rendered.

(e) Payment to pharmacy providers shall be the lower of the
pharmacy’s usual and customary charge or the reimbursement rate
pursuant to subdivision (b) of Section 14105.45.

(f) Notwithstanding Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code,
the department may implement, interpret, or make specific this
section by means of a provider bulletin or notice, policy letter, or
other similar instructions, without taking regulatory action.

end delete