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 ----------------------------------------------------------------- |Author: |Hill | |----------+------------------------------------------------------| |Version: |April 13, 2016 Amended | ----------------------------------------------------------------- ---------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ---------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Sarah Mason | |: | | ----------------------------------------------------------------- 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: SB 1193 (Hill) Page 2 of ? 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 SB 1193 (Hill) Page 3 of ? 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 SB 1193 (Hill) Page 4 of ? 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 SB 1193 (Hill) Page 5 of ? 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 SB 1193 (Hill) Page 6 of ? 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 SB 1193 (Hill) Page 7 of ? 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 SB 1193 (Hill) Page 8 of ? 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 SB 1193 (Hill) Page 9 of ? 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 SB 1193 (Hill) Page 10 of ? 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 SB 1193 (Hill) Page 11 of ? 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. SB 1193 (Hill) Page 12 of ? 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: SB 1193 (Hill) Page 13 of ? "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. SB 1193 (Hill) Page 14 of ? 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. -- END --