BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: SB 1193 Hearing Date: April 18,
2016
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|Author: |Hill |
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|Version: |April 13, 2016 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Sarah Mason |
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Subject: Pharmacy: outsourcing facilities
SUMMARY: Extends the operation of the Board of Pharmacy (Board) and
Pharmacy Law until 2021 and makes various changes to the
Pharmacy Law intended to improve Board oversight of licensees
involved in the acquisition, storage, distribution and
dispensing of dangerous drugs and dangerous devices, including:
oversight by the Board for outsourcing facilities; registration
with the Board for use of an automated delivery device by a
pharmacy; timeline requirements for the Board to approve clinic
licenses; and technical changes.
Existing 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.
3)Establishes the DQSA, which:
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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 FDCA and from requirements to label products with
adequate directions from use if the requirements in Section
503B listed above are met. (21 USC § 353b)
5)Under the Pharmacy Law, provides for the licensure and
regulation of pharmacies, pharmacists and wholesalers of
dangerous drugs or devices by the Board within the Department
of Consumer Affairs (DCA) until January 1, 2017. (Business
and Professions Code (BPC) § 4000 et seq.)
6)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
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injectables cannot be renewed without a Board inspection.
(BPC §§ 4127-4127.1)
7)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)
8)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)
9)Authorizes a pharmacy to provide pharmacy services to a health
facility through the use of an automated drug delivery system
(ADD) that need not be located at the same location as the
pharmacy. Provides that drugs stored in an ADD shall be part
of the inventory of the pharmacy providing pharmacy services
to that facility, and drugs dispensed from ADD shall be
considered to have been dispensed by that pharmacy. (BPC §
4119.1)
10) Outlines the types of licensed professionals authorized to
establish a professional corporation. (Corporations Code §
13401.5)
This bill:
1) Extends the operation of the Board and Board Executive
Officer (EO) until January 1, 2021.
2) Related to outsourcing facilities: Requires outsourcing
facilities [as defined under federal law] to be licensed by
the Board; prohibits an outsourcing facility to be
simultaneously licensed with the Board as a sterile
compounding pharmacy at the same location; prohibits a
licensed outsourcing facility from filling patient specific
prescriptions; requires an outsourcing facility to notify the
Board of any disciplinary or other action taken by another
state or the FDA or of any recall notices or any adverse
events potentially attributable to an outsourcing facility's
products; requires the Board to inspect the location of a
nonresident outsourcing facility to ensure that the facility
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is in compliance with all laws and regulations before issuing
or renewing a nonresident outsourcing facility's license;
authorizes the Board to issue a cease and desist order to an
outsourcing facility if the Board has reasonable belief that
the products produced by the facility poses an immediate
threat to the public health or safety and; establishes a $780
fee for outsourcing facility licensure.
3) Requires a pharmacy using an automated drug delivery system
(ADD) to register use of the ADD with the Board, including
the address at which the ADD is being used.
4) Requires the Board to issue a license to, or incorporate
changes reported by, a clinic, within 30 days of receiving a
completed application and payment of any prescribed fees.
5) Authorizes the Board to issue a cease and desist to an entity
practicing activities without a license if those activities
would require licensure by the Board.
6) Includes pharmacists in the list of licensed professionals
authorized to establish a professional corporation.
FISCAL EFFECT: Unknown. This bill is keyed "fiscal" by
Legislative Counsel.
COMMENTS:
1. Purpose. This bill is sponsored by the Author , and is one of
five "sunset bills" the Author is sponsoring this year.
According to the Author, this bill is necessary to make
changes to the Pharmacy Law in order to improve Board
oversight of licensees involved in the acquisition, storage,
distribution and dispensing of dangerous drugs and dangerous
devices.
2. Oversight Hearings and Sunset Review of Licensing Boards and
Programs. Beginning in 2015, the Senate Business and
Professions Committee and the Assembly Business and
Professions Committee (Committees) began their comprehensive
sunset review oversight of 12 regulatory entities: DCA,
Acupuncture Board, Board of Behavioral Sciences, California
Massage Therapy Association, Court Reporters Board, Board of
Pharmacy, Physician Assistant Board, Board of Podiatric
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Medicine, BPPE, Board of Psychology, Bureau of Real Estate,
Bureau of Real Estate Appraisers and Veterinary Medical
Board.
The Committees conducted three oversight hearings in March.
This bill and the accompanying sunset bills are intended to
implement legislative changes as recommended by staff of the
Committees and which are reflected in the Background Papers
prepared by Committee staff for each agency and program
reviewed this year.
3. Background on the Board. The Board is responsible for
enforcing federal and state laws pertaining to the
acquisition, storage, distribution and dispensing of
dangerous drugs (including controlled substances) and
dangerous devices. The Board has over 140,000 licensees in
23 license categories that include both personal and business
licenses. As an agency that regulates the individuals and
businesses that dispense, compound, provide, store and
distribute prescription drugs and devices and pharmaceutical
services to the public, or to other health care practitioners
in compliance with state and federal law, the licensing of
pharmacists, pharmacies, and pharmacy technicians is the
primary focus of Board activity, with consumer protection at
the core of the Board's operations. The Board's regulatory
authority, as described in the Pharmacy Law, extends over
individuals and firms located both within and outside
California, if they provide services into California. The
Board notes that it also ensures the safety of drug products
dispensed to patients and regulates those who handle, store
and ship products from the manufacturer through the supply
chain to the pharmacy and ultimately to the patient.
The Board is a special fund agency whose activities are
funded through regulatory fees and license fees. Board
licensees are integral to the delivery of quality health
care. They compound, transport, dispense and store
prescription drugs and devices for patients that are
essential for patient care and treatment. Pharmacists also
convey information related to drug therapy management and are
the health care provider most educated on pharmaceutical care
and management. The Board has a highly diverse and detailed
licensing program for the individuals and facilities the
Board regulates, reflecting the careful and deliberative
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manner in which the U.S. regulates the manufacturing,
distributing, and dispensing of prescription drugs and
devices.
The Board's enforcement activities are the core of its
program, with the majority of its staff and resources
dedicated to enforcement functions. The Board aims to
prevent events that could result in patient harm and ensure
that there are consequences to deter events from occurring in
other pharmacies. The Board believes its greatest tool in
performing the broad range of investigations and inspections
required to regulate such a diverse licensing population are
licensed pharmacist inspectors. These investigators work
from home offices throughout the state and perform random,
unannounced inspections to detect violations, investigate
complaints, monitor licensees on probation, educate licensees
about Pharmacy Law requirements, serve as expert witnesses in
disciplinary hearings and identify violations and issues that
non-pharmacists may not be able to identify.
4. Review of the Board - Issues Identified and Review of the
Board - Issues Identified and Recommended Changes. The
following are some of the major issues pertaining to the
Board along with background information concerning the
particular issue. Recommendations were made by Committee
staff regarding the particular issue areas which needed to be
addressed.
a) Issue : Outsourcing Facilities.
Background : DQSA was signed into law by President Obama on
November 27, 2013. Prompted by the fatal fungal meningitis
outbreak in 2012 linked to unsanitary conditions at a
Massachusetts compounding pharmacy, as well as concerns
regarding increases in counterfeit, falsified, substandard
and dangerous prescription medications, DQSA contained two
parts - the Compounding Quality Act and the Drug Supply
Chain Security Act.
The Compounding Quality Act created a voluntary compliance
regime in which large-scale compounding pharmacies may
voluntarily register as "outsourcing facilities" and be
subject to oversight by the FDA in much of the same way
that traditional pharmaceutical manufacturers are
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monitored. These facilities must adhere to more stringent
current good manufacturing practices and are subject to a
risk-based inspection schedule. The FDA has registered 59
outsourcing facilities, three of which are in California.
California law does not currently recognize outsourcing
facilities because state law authorizes only limited
anticipatory pharmacy compounding, either for prescriber
office use or to meet customary demand. For a number of
years, the Board and other federal and state regulatory
agencies have grappled with establishing a tipping point at
which a pharmacy compounds enough medications to become a
manufacturer.
The Board currently licenses entities that would be
considered outsourcing facilities as sterile compounding
pharmacies - "resident" if they are located in California
and "non-resident" if located out of state and ships into
California. There is no distinction between large scale
and small scale facilities.
However, this regulatory system is losing its viability as
a solution for two reasons. First, it does not recognize
the federal outsourcing requirements that permit large
scale compounding. Second, it does not align with other
states' systems; multiple states are moving to establish
regulatory frameworks to license outsourcing facilities as
separate entities and some prohibit licensure of these
facilities as sterile compounding pharmacies, contrary to
California's structure.
In 2015, the Board sponsored legislation (SB 619, Morrell)
to license outsourcing facilities. The Board believes that
licensing these entities both within and outside California
will ensure that the state's hospitals and practitioners
have access to high quality, carefully compounded sterile
medication.
Recommendation and Proposed Statutory Change : The
Committee suggests adding an outsourcing facility license
to the Pharmacy Law and recommends that the Board conduct a
careful calculation of costs associated with regulating
these facilities to ensure that budget imbalances do not
result (in the event that the workload and travel necessary
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for the scope of this work) exceed the revenue from fees.
This bill makes the following changes to the Pharmacy Law
related to outsourcing facilities:
Requires outsourcing facilities [as defined under federal
law] to be licensed by the Board; prohibits an outsourcing
facility to be simultaneously licensed with the Board as a
sterile compounding pharmacy at the same location;
prohibits a licensed outsourcing facility from filling
patient specific prescriptions; requires an outsourcing
facility to notify the Board of any disciplinary or other
action taken by another state or the FDA or of any recall
notices or any adverse events potentially attributable to
an outsourcing facility's products; 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; authorizes the Board to
issue a cease and desist order to an outsourcing facility
if the Board has reasonable belief that the products
produced by the facility poses an immediate threat to the
public health or safety and; establishes a $780 fee for
outsourcing facility licensure.
b) Issue : Automated Drug Delivery Systems.
Background : Current law authorizes the use of ADDs which
are a mechanical system controlled remotely by a pharmacist
that performs operations or activities, other than
compounding or administration, relative to the storage,
dispensing, or distribution of prepackaged dangerous drugs
or dangerous devices. An automated drug delivery system is
required to collect, control, and maintain all transaction
information to accurately track the movement of drugs into
and out of the system for security, accuracy, and
accountability. Under some circumstances the pharmacist
must authorize the release of medication.
Pharmacies are able to operate automated delivery devices
in various settings away from a licensed pharmacy or within
a licensed facility. This includes in skilled nursing homes
and other specified health care facilities, certain
clinics, and hospitals for drug storage and access outside
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of the pharmacy.
The demand for additional use of these delivery devices is
growing. A pilot study is currently underway that would
allow patients to pick up medication from a delivery device
that is not specifically located in a pharmacy so long as
patient consultation is first provided.
The Board reports that it is not currently able to track
how many of these delivery devices are in use, where they
are in use, or which pharmacy is responsible for specific
delivery devices. A registration would enable the Board to
identify which pharmacies operate these delivery devices
and where each is located.
Recommendation and Proposed Statutory Change : The
Committees may wish to authorize the Board to establish a
registration requirement that links automated delivery
device systems to the pharmacy that owns and is responsible
for the medications stored and released from the device.
As part of the registration, the Committees may wish to
require that the Board is provided with the policies and
procedures that demonstrate appropriate security of the
device and how patient consultation is being provided.
Registration of these systems may also require a reporting
function to ensure that the Board is made aware of drug
losses from the machines, similar to the requirement for
pharmacies to report drug loss information.
This bill makes the following changes to the Pharmacy Law
related to ADDs:
Requires a pharmacy using an automated drug delivery system
(ADD) to register use of the ADD with the Board, including
the address at which the ADD is being used.
c) Issue : Backlogs.
Background : The Board's failure to timely issue a license
to an individual or entity prevents or at least delays that
individual or business from working. For example, if the
Board delays a licensing decision because it is
investigating an applicant's criminal background, the job
intended for that applicant may be given to another
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individual. As a result, the Board's delay in licensing,
while often necessary, has a direct impact on consumers and
practitioners.
The Board aims to issue a permit as quickly as possible
once the applicant has been determined to be qualified for
licensure. The Board notes that it works with applications
from new businesses that must be licensed by the Board, and
strives to ensure that they can open on the date they
desire, even when they turn applications in very close to
the desired opening date. According to the Board, this
usually can be accomplished but there are a number of
components that must be completed before an applicant can
receive a new pharmacy or wholesaler license. The Board
does have the ability to issue temporary licenses to
pharmacies and wholesalers if a certain number of
requirements are fulfilled, which in turn permits the new
business to operate and the Board can then finalize review
of the licensing documents over the course of 180 days.
The Board may also benefit from a statutory clarification
related to processing timelines for applications filed by
clinics opening a new location, reporting a change to an
existing location or updating certain information like
changes to corporate officers. Similarly, a streamlined
process for commonly-owned clinics to use just one
application may speed up timelines and improvements may be
realized if clinic corporations owning more than one
Board-licensed clinic are authorized to renew all of their
permits at one time.
Recommendation and Proposed Statutory Change : The
Committees may wish to amend the Pharmacy Law to require
clinic applications to be processed within 30 days, to
create a streamlined process for commonly-owned clinics to
report organization-wide changes in corporate officers,
consulting pharmacists and medical directors and to create
one renewal date for all clinic permits, ensuring that
commonly owned clinics could be renewed in a timely manner.
This bill makes the following changes to the Pharmacy Law
related to licensure processing:
Requires the Board to issue a license to, or incorporate
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changes reported by, a clinic, within 30 days of receiving
a completed application and payment of any prescribed fees.
d) Issue : Cease and Desist for Unlicensed Activity.
Background : The Board continues to focus on unlicensed
activity and take swift action to prevent harm to
California patients. One particular are of unlicensed
activity that the Board has identified is the provision of
services to Californians from a business or individual
located out of state, that may be licensed to do business
in that state, but is not licensed under the Board as a
nonresident pharmacy or wholesaler. Sometimes the Board
may come across pharmacy services being performed outside
of a pharmacy but not licensed by the Board. Periodically,
the Board identifies brokers who make prescription drug
transactions without licensure; for example, a wholesaler
broker offers to sell to a pharmacy prescription drugs,
however the broker is not licensed in California as
required.
The Board does not currently have the authority to issue a
cease and desist order to businesses involved in unlicensed
activity. Simply citing and fining an unlicensed business
is often an insufficient consequence to stop unlicensed
activity because the Board reports that frequently the
business will continue to do the very action which violates
the law.
Recommendation and Proposed Statutory Change : The
Committees may wish to amend the Pharmacy Law to allow the
Board to issue a cease and desist order for unlicensed
activity.
This bill makes the following changes to the Pharmacy Law
related to unlicensed activity:
Authorizes the Board to issue a cease and desist to an entity
practicing activities without a license if those activities
would require licensure by the Board.
e) Issue : Professional Corporations.
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Background : Corporations Code § 13401.5 authorizes the
formation of various healing arts professional corporations
and establishes which healing arts licensees who are not of
the same license type as the corporation may be
shareholders, officers, and directors of that corporation.
Any person licensed under the BPC, the Chiropractic Act, or
the Osteopathic Act may be employed by these professional
corporations. Thus, the services of professional
corporations are not limited to the named profession. For
example, a nursing corporation may have a director who is a
chiropractor, a shareholder who is an acupuncturist, and
employ an accountant, podiatrist, and a marriage and family
therapist, none of which would traditionally be seen as
providing the professional services of nursing.
Current law authorizes a medical corporation to have the
following licensees as officers, directors, and
shareholders:
(1) Licensed doctors of podiatric medicine.
(2) Licensed psychologists.
(3) Registered nurses.
(4) Licensed optometrists.
(5) Licensed marriage and family therapists.
(6) Licensed clinical social workers.
(7) Licensed physician assistants.
(8) Licensed chiropractors.
(9) Licensed acupuncturists.
(10) Naturopathic doctors.
(11) Licensed professional clinical counselors.
(12) Licensed physical therapists.
Stakeholders have requested that pharmacists be added to
this list, given the recent expansion of the pharmacists'
scope of practice by SB 493 (Hernandez, Chapter 469,
Statutes of 2013).
Pharmacy corporations were authorized in 1996 in the
Pharmacy Practice Act, rather than the Corporations Code.
Current law allows a pharmacy corporation's officers,
directors, and shareholders to be anyone who is a "licensed
person" as defined in Section 13401 of the Corporations
Code:
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"Licensed person" means any natural person who is duly
licensed under the provisions of the Business and
Professions Code, the Chiropractic Act, or the Osteopathic
Act to render the same professional services as are or will
be rendered by the professional corporation or foreign
professional corporation of which he or she is, or intends
to become, an officer, director, shareholder, or employee.
Since the "same professional services" rendered by the
corporation is an expansive concept, it can be argued that
a physician can be an officer, director, or shareholder of
a pharmacy corporation. It follows, then, that it would be
equitable for a pharmacist to be an officer, director, or
shareholder of a medical corporation.
Recommendation and Proposed Statutory Change : The
Committees may wish to amend the Pharmacy Law to allow the
Board to issue a cease and desist order for unlicensed
activity.
This bill makes the following changes to the Corporations
Code related to professional corporations:
Includes pharmacists in the list of licensed professionals
authorized to establish a professional corporation.
f) Issue : Continued Regulation by the Board.
Background : The Board of Pharmacy has shown over the years
a strong commitment to improve its overall efficiency and
effectiveness and has worked cooperatively with the
Legislature and this Committee to bring about necessary
changes. The Board should be continued with a four-year
extension of its sunset date so that the Committee may
review once again if the issues and recommendations in this
Background Paper and others of the Committee have been
addressed.
Recommendation and Proposed Statutory Change : Recommend
that the pharmacist profession, pharmacies and other
licensees necessary in the delivery of medication to
patients continue to be regulated by the current Board
members in order to protect the interests of the public and
be reviewed once again in four years.
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This bill makes the following changes to the Pharmacy Law
related to the Board's continued operation:
Extends the operation of the Board and Board EO until
January 1, 2021.
5. Arguments in Support. Planned Parenthood Planned Parenthood
Affiliates of California supports the provisions in this bill
related to processing efficiencies for clinic applications.
SUPPORT AND OPPOSITION:
Support:
Planned Parenthood Affiliates of California
Opposition:
None on file as of April 12, 2016.
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