BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON
          BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
                              Senator Jerry Hill, Chair
                                2015 - 2016  Regular 

          Bill No:            SB 619          Hearing Date:    April 27,  
          2015
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          |Author:   |Morrell                                               |
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          |Version:  |April 6, 2015                                         |
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          |Urgency:  |No                     |Fiscal:    |Yes              |
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          |Consultant|Janelle Miyashiro, Sarah Mason                        |
          |:         |                                                      |
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               Subject:  Pharmacy:  outsourcing facilities:  licensure


          SUMMARY:  Requires an outsourcing facility, as defined by federal law,  
          to be licensed by the California State Board of Pharmacy before  
          doing business within and across state lines.  

          Existing federal law:
          
          1)Establishes the United States Food and Drug Administration  
            (FDA) to protect the public health by assuring the safety,  
            effectiveness, quality, and security of human and veterinary  
            drugs, vaccines and other biological products, and medical  
            devices through the Food, Drug, and Cosmetic Act (FDCA).  (21  
            United States Code (USC) § 301 et seq.)

          2)Establishes the Drug Supply Chain Security Act as part of the  
            Drug Quality and Security Act (DQSA), which outlines steps to  
            build an electronic, interoperable system to identify and  
            trace certain prescription drugs as they are distributed in  
            the United States.

             a)   Includes in the term "current good manufacturing  
               practice", the implementation of oversight and controls  
               over the manufacture of drugs to ensure quality, including  
               managing the risk of and establishing the safety of raw  
               materials, materials used in the manufacturing of drugs,  
               and finished drug products.  (21 USC § 351)








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          1)Establishes standards for introduction of new drugs into  
            interstate commerce, including submission of safety and  
            effective use reports, list of articles and compositions used  
            as components in the drug, methods used, and the manufacture,  
            processing, and packing of the drug.  (21 USC § 355)

          2)Establishes the DQSA, which:

             a)   Defines an outsourcing facility as a facility at one  
               geographic location or address that:

               i)     Is engaged in the compounding of sterile human  
                 drugs.

               ii)    Has elected to register as an outsourcing facility.

               iii)   Complies with all of the requirements in the newly  
                 enacted Section 503B, including: 

                  1.        Reporting biannually to the Secretary of  
                    Health and Human Services (HHS) on what drugs are  
                    compounding in the facility, the source of ingredients  
                    used to compound, and submission of all adverse event  
                    reports.

                  2.        Compliance with the Current Good Manufacturing  
                    Practice (CGMP) regulations.

                  3.        Drugs are compounded under the direct  
                    supervision of a licensed pharmacist in a registered  
                    facility.

                  4.        Annual registration with the FDA. 

             a)   Exempts drug products compounded at an outsourcing  
               facilities from FDA approval requirements in section 505 of  
               the FD&C Act and from requirements to label products with  
               adequate directions from use if the requirements in section  
               503B listed above are met.  (21 USC § 353b)
          
          Existing California law:
          
          1)Establishes the practice of pharmacy and provides for the  
            licensing and regulation of pharmacies and pharmacists by the  








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            Board of Pharmacy (Board).  (Business and Professions Code  
            (BPC) § 4000 et seq.)

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

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

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

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

          6)States that a nonresident pharmacy cannot compound sterile  
            drug products for shipment into California without a sterile  
            compounding pharmacy license issued by the Board. (BPC §  
            4127.2)

          7)Authorizes the Board to issue a cease and desist order to a  
            pharmacy compounding sterile injectables whenever the Board  
            has reasonable belief, based on information obtained through  
            an investigation or inspection, that there is an immediate  
            threat to public health or safety.  (BPC § 4127.3)

          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  








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

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

          This bill:

          1) Requires outsourcing facilities [as defined under federal  
             law] to register with the Board annually.

          2) Requires a licensed outsourcing facility to compound drugs in  
             compliance with federal Current Good Manufacturing Practices.  
               

          3) Prohibits an outsourcing facility to be simultaneously  
             licensed with the Board as a sterile compounding pharmacy at  
             the same location.

          4) Prohibits a licensed outsourcing facility from filling  
             patient specific prescriptions.

          5) Requires an outsourcing facility to notify the Board of any  
             disciplinary or other action taken by another state or the  
             FDA within 10 days of the action.








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          6) Requires an outsource facility to notify the Board within 24  
             hours of any recall notices or the reporting of any adverse  
             events potentially attributable to an outsourcing facility's  
             products. 

          7) Requires the Board to inspect the location of a nonresident  
             outsourcing facility to ensure that the facility is in  
             compliance with all laws and regulations before issuing or  
             renewing a nonresident outsourcing facility's license.  This  
             includes:

             a)   A revision of a current copy of the nonresident  
               outsourcing facility's policies and procedures for sterile  
               and non-sterile compounding.

             b)   Copies of all inspection reports of the nonresident  
               outsourcing facility's premises conducted in the past 12  
               months.

             c)   A list of all sterile and non-sterile drug products  
               compounded within the past 
             12 months.

          1) Authorizes the Board to issue a cease and desist order to an  
             outsourcing facility if the Board has reasonable belief,  
             based on information obtained during an inspection or  
             investigation, that the products produced by the facility  
             poses an immediate threat to the public health or safety.

          2) Establishes a fine of up to $5,000 per occurrence for a  
             violation of any of the provisions or regulations outlined  
             above.

          
          FISCAL  
          EFFECT:  Unknown.  This bill has been keyed "fiscal" by  
          Legislative Counsel.

          
          COMMENTS:
          
          1. Purpose.  This bill is sponsored by the  California State  
             Board of Pharmacy  .  The Author states that this bill creates  








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             California licensing requirements for a new category of  
             prescription drug compounding entity called an outsourcing  
             facility.  The Author adds that the federal government has  
             created this new category of compounding facilities at the  
             federal level via the Drug Quality and Security Act (DQSA)  
             and that the DQSA allows for federal registration of  
             outsourcing facilities under section 503B (in order to  
             recognize specialized businesses that compound prescription  
             medication in large quantities which are typically not  
             pursuant to a patient-specific prescription that typically  
             sell this medication to practitioners, hospitals and  
             sometimes patients in multiple states.)

             The Author cites the 2012 incident related to compounded drug  
             products from the New England Compounding Center in  
             Massachusetts, when more than 65 people in multiple states  
             were killed and hundreds of others were severely injured due  
             to contaminated compounded medication, as sparking state and  
             federal policy actions.  The Author states that "each of the  
             50 states is grappling with how to regulate these outsourcing  
             facilities as a new category of prescription drug compounder"  
             in order to hold these compounding facilities to a high  
             standard for public health and safety.

          2. Background.  On November 27, 2013, President Obama signed the  
             DQSA which established provisions relating to the oversight  
             of compounded human drugs.  Title I of the DQSA, the  
             Compounding Quality Act, removed certain provisions from  
             section 503A of the FDCA that were found to be  
             unconstitutional by the U.S. Supreme Court in 2002.  The  
             Compounding Quality Act simultaneously created a new section,  
             503B, to allow compounding facilities to become a registered  
             "outsourcing facility".  Registration as an outsourcing  
             facility is a voluntary program, and companies must meet the  
             requirements in 503B to continue operating as an outsourcing  
             facility.
             
             The law defines an "outsourcing facility" as a facility at  
             one geographic location or address that is engaged in the  
             compounding of sterile human drugs, has elected to register  
             as an outsourcing facility, and complies with all of the  
             requirements of section 503B; including biannual reporting to  
             the Secretary of Health and Human Services on what drugs are  
             compounded in the facility, the source of ingredients used to  








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             compound, submission of all adverse event reports, and  
             compliance with the CGMP regulations.  Outsourcing facilities  
             are subject to inspection by the FDA according to a  
             risk-based schedule and must meet FDA reporting requirements  
             for product recalls and adverse events.  An outsourcing  
             facility is not required to be a licensed pharmacy and may or  
             may not obtain prescriptions from identified individual  
             patients.

             Drugs that are compounded by an outsourcing facility can  
             qualify for exemptions from the FDA new drug approval  
             requirements and the requirement to label products with  
             adequate directions for use if all the conditions in 503B are  
             met.  However, drug products compounded by a registered  
             outsourcing facility must have a prominent label that  
             identifies the drug as a compounded drug product.

             Currently, there are no specific FDA requirements for  
             licensure as an outsourcing compounding facility.  The FDA  
             released draft guidance in February 2015 titled "For Entities  
             Considering Whether to Register as Outsourcing Facilities  
             Under Section 503B of the Federal Food, Drug, and Cosmetic  
             Act" for those facilities that are considering registration  
             under 503B.  This draft guidance, however, does not include  
             CGMP standards, inspection schedules, or staffing  
             requirements specific to outsourcing facilities.  The FDA has  
             currently issued licenses to 54 outsourcing facility entities  
             that ship compounded drug products within and across state  
             lines.  Three of these federally licensed outsourcing  
             facilities are located in California.

             There has been some debate as to how outsourcing facilities  
             should be licensed and regulated at the state level.  An  
             outsourcing facility must be licensed federally with the FDA  
             to perform the duties of large scale compounding.  Under  
             current California and federal law, a pharmacy may compound  
             medication prescribed for a patient by a prescriber.  The  
             Board licenses these entities as resident sterile compounding  
             pharmacies if they are located in California or as  
             non-resident compounding pharmacies if the pharmacy ships the  
             sterile compounded products into California.    

             However, outsourcing facilities integrate both the functions  
             traditionally performed by drug manufacturers (non-patient  








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             specific mass drug manufacturing) with the traditional  
             functions of pharmacies (compounding and supplying drug  
             products to prescribers and hospitals).  The FDA does not  
             require an entity to be licensed as a pharmacy in order to be  
             licensed as an outsourcing facility.  However, the FDA does  
             not authorize pharmacies to compound and distribute  
             non-patient specific medications.

             This bill will create new licensure requirements, specific to  
             the state of California, for in state and out of state  
             outsourcing facilities doing business within and across state  
             lines.  These new requirements will prohibit an outsourcing  
             facility to be located in the same licensed premises as a  
             pharmacy, therefore only allowing outsourcing facilities to  
             distribute compounded drugs for non-patient specific  
             prescriptions.  Since the FDA has yet to release specific  
             federal requirements for outsourcing facilities, this bill  
             anticipates future federal requirements and creates  
             California specific standards by which licensed outsourcing  
             facilities must comply.

          3. Prior Related Legislation.   SB 600  (Lieu, Chapter 492,  
             Statutes of 2014) repealed California's electronic pedigree  
             law to conform to the DQSA and declared that any foreign  
             dangerous drug that is not approved by the FDA, or that is  
             obtained outside the licensed supply chain, to be misbranded  
             and that anyone who purchases or sells that drug is guilty of  
             a misdemeanor and subject to a fine of not more than $10,000.  
             
             
              AB 2605  (Bonilla, Chapter 507, Statutes of 2014) requires  
             third party logistic providers who provide storage, handling,  
             or distribution services, to be licensed by the California  
             Board of Pharmacy.   

              SB 294  (Emmerson, Chapter 565, Statutes of 2013) requires an  
             inspection by the California Board of Pharmacy (Board) prior  
             to licensure for all compounding pharmacies that make or  
             distribute compounded drugs in California.  Requires a  
             compounding pharmacy to notify the Board within 24 hours of  
             initiating any recall, to provide a list of all drugs it  
             compounds to the Board, and to notify the Board of any  
             discipline or suspension of accreditation.
          








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          SUPPORT AND OPPOSITION:
          
           Support:  

          Board of Pharmacy (Sponsor)

           Opposition:  

          None on file as of April 21, 2015.

          .
                                      -- END --