BILL ANALYSIS
SENATE COMMITTEE ON PUBLIC SAFETY
Senator Mark Leno, Chair A
2009-2010 Regular Session B
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7
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AB 2747 (Lowenthal) 7
As Amended April 26, 2010
Hearing date: June 22, 2010
Penal Code
SM:mc
DEPARTMENT OF CORRECTIONS AND REHABILITATION:
PHARMACY SERVICES
HISTORY
Source: California Prison Healthcare Services (Federal
Receiver)
Prior Legislation: SB 278 (Ducheny) - 2003, vetoed
Support: Unknown
Opposition:Taxpayers for Improving Public Safety
Assembly Floor Vote: Ayes 71 - Noes 0
KEY ISSUES
SHOULD THE CALIFORNIA DEPARTMENT OF CORRECTIONS AND
REHABILITATION (CDCR) BE REQUIRED TO MAINTAIN AND OPERATE A
COMPREHENSIVE PHARMACY SERVICES PROGRAM, AS SPECIFIED?
SHOULD CDCR BE AUTHORIZED TO OPERATE AND MAINTAIN A CENTRALIZED
PHARMACY DISTRIBUTION CENTER, AS SPECIFIED?
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(CONTINUED)
SHOULD CDCR BE REQUIRED TO ENSURE THAT THERE IS A PROGRAM PROVIDING
FOR THE REGULAR INSPECTION OF ALL DEPARTMENT PHARMACIES AND
DOCUMENTATION OF COMPLIANCE?
SHOULD CDCR BE REQUIRED, ON MARCH 1, 2012, AND EACH MARCH 1
THEREAFTER, TO REPORT SPECIFIED INFORMATION REGARDING PHARMACEUTICAL
SERVICES TO SPECIFIED LEGISLATIVE COMMITTEES?
PURPOSE
The purpose of this bill is to (1) require the Department of
Corrections and Rehabilitation (CDCR) to maintain and operate a
comprehensive pharmacy services program, as specified; (2)
authorize CDCR to operate and maintain a centralized pharmacy
distribution center, as specified; (3) authorize CDCR to
investigate and initiate potential systematic improvements
within the department's statewide pharmacy administration
system, as specified; (4) require CDCR to ensure that there is a
program providing for the regular inspection of all department
pharmacies and documentation of compliance; and (5) require
that, on March 1, 2012, and each March 1 thereafter, CDCR report
specified information regarding pharmaceutical services to
specified legislative committees.
Existing law requires the California Department of Corrections
and Rehabilitation (CDCR) to consult with the California Medical
Assistance Commission to assist the department in planning and
negotiating contracts for the purchase of health care services.
The commission shall advise the department, and may negotiate
directly with providers on behalf of the department, as mutually
agreed upon by the Commission and the department. (Penal Code
5023.)
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Existing law authorizes CDCR to adopt regulations requiring
manufacturers of drugs to pay CDCR a rebate for the purchase of
drugs for offenders in state custody that is at least equal to
the rebate that would be applicable to the drug under the
federal Social Security Act. (Penal Code
5024.)
This bill requires CDCR to maintain and operate a comprehensive
pharmacy services program for those facilities under the
jurisdiction of the department that, at a minimum, incorporates
all of the following:
A statewide pharmacy administration system with direct
authority and responsibility for program administration and
oversight.
Medically necessary pharmacy services using
professionally and legally qualified pharmacists,
consistent with the size and the scope of medical services
provided.
Written procedures and operational practices pertaining
to the delivery of pharmaceutical services.
A multidisciplinary, statewide Pharmacy and Therapeutics
Committee responsible for all of the following:
o Developing and managing a department
formulary.
o Standardizing the strengths and dosage forms
for medications used in department facilities.
o Maintaining and monitoring a system for the
review and evaluation of corrective actions related to
errors in prescribing, dispensing, and administering
medications.
o Conducting regular therapeutic category
reviews for medications listed in the department
formulary.
o Evaluating medication therapies and providing
input to the development of disease management
guidelines used in the department.
A requirement for the use of generic medications, when
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available, unless an exception is reviewed and approved in
accordance with an established nonformulary approval
process.
Use of an enterprise-based pharmacy operating system
that provides management with information on prescription
workloads, medication utilization, prescribing data, and
other key pharmacy information.
This bill authorizes CDCR to operate and maintain a centralized
pharmacy distribution center to provide advantages of scale and
efficiencies related to medication purchasing, inventory
control, volume production, drug distribution, workforce
utilization, and increased patient safety.
The centralized pharmacy distribution center shall
include systems to do all of the following:
o Order and package bulk pharmaceuticals and
prescription and stock orders for all department
correctional facilities.
o Label medications as required to meet state
and federal prescription requirements.
o Provide barcode validation matching the drug
to the specific prescription or floor stock order.
o Sort completed orders for shipping and
delivery to department facilities.
Notwithstanding any other requirements, the department
centralized pharmacy distribution center is authorized to
do the following:
o Package bulk pharmaceuticals into both floor
stock and patient-specific packs.
o Reclaim, for reissue, unused and unexpired
medications.
o Distribute the packaged products to department
facilities for use within the state corrections
system.
The centralized pharmacy distribution center shall
maintain a system of quality control checks on each process
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used to package, label, and distribute medications. The
quality control system shall include a regular process of
random checks by a licensed pharmacist.
This bill authorizes CDCR to investigate and initiate potential
systematic improvements in order to provide for the safe and
efficient distribution, control, and accountability of drugs
within the department's statewide pharmacy administration
system, taking into account factors unique to the correctional
environment.
This bill requires CDCR to ensure that there is a program
providing for the regular inspection of all department
pharmacies in the state to verify compliance with applicable
law, rules, regulations, and other standards as may be
appropriate to insure the health, safety, and welfare of the
department's inmate patients. Corrective actions necessary to
resolve any discrepancies or deficiencies shall be documented in
writing and monitored by the department for compliance.
This bill requires that, on March 1, 2012, and each March 1
thereafter, CDCR shall report all of the following to the Joint
Legislative Budget Committee, the Senate Committee on
Appropriations, the Senate Committee on Budget and Fiscal
Review, the Senate Committee on Health, the Senate Committee on
Public Safety, the Assembly Committee on Appropriations, the
Assembly Committee on Budget, the Assembly Committee on Health,
and the Assembly Committee on Public Safety:
The extent to which the Pharmacy and Therapeutics
Committee has achieved the objectives set forth in this
section, as well as the most significant reasons for
achieving or not achieving those objectives.
The extent to which the department is achieving the
objective of operating a fully functioning and centralized
pharmacy distribution center, as set forth in this section,
which distributes pharmaceuticals to every adult prison
under the jurisdiction of the department, as well as the
most significant reasons for achieving or not achieving
that objective.
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The extent to which the centralized pharmacy
distribution center is achieving cost savings through
improved efficiency and distribution of unit dose
medications.
A description of planned or implemented initiatives to
accomplish the next 12 months' objectives for achieving the
goals set forth in this section, including a fully
functioning and centralized pharmacy distribution center
that distributes pharmaceuticals to every adult facility
under the jurisdiction of the department.
The costs for prescription pharmaceuticals for the
previous fiscal year, both statewide and at each adult
prison under the jurisdiction of the department, and a
comparison of these costs with those of the prior fiscal
year.
This bill provides that the requirement for submitting a report
imposed under subdivision (e) is inoperative on March 1, 2016,
pursuant to Section 10231.5 of the Government Code.
RECEIVERSHIP/OVERCROWDING CRISIS AGGRAVATION
The severe prison overcrowding problem California has
experienced for the last several years has not been solved. In
December of 2006 plaintiffs in two federal lawsuits against the
Department of Corrections and Rehabilitation sought a
court-ordered limit on the prison population pursuant to the
federal Prison Litigation Reform Act. On January 12, 2010, a
federal three-judge panel issued an order requiring the state to
reduce its inmate population to 137.5 percent of design capacity
-- a reduction of roughly 40,000 inmates -- within two years.
In a prior, related 184-page Opinion and Order dated August 4,
2009, that court stated in part:
"California's correctional system is in a tailspin,"
the state's independent oversight agency has reported.
. . . (Jan. 2007 Little Hoover Commission Report,
"Solving California's Corrections Crisis: Time Is
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Running Out"). Tough-on-crime politics have increased
the population of California's prisons dramatically
while making necessary reforms impossible. . . . As a
result, the state's prisons have become places "of
extreme peril to the safety of persons" they house, .
. . (Governor Schwarzenegger's Oct. 4, 2006 Prison
Overcrowding State of Emergency Declaration), while
contributing little to the safety of California's
residents, . . . . California "spends more on
corrections than most countries in the world," but the
state "reaps fewer public safety benefits." . . . .
Although California's existing prison system serves
neither the public nor the inmates well, the state has
for years been unable or unwilling to implement the
reforms necessary to reverse its continuing
deterioration. (Some citations omitted.)
. . .
The massive 750% increase in the California prison
population since the mid-1970s is the result of
political decisions made over three decades, including
the shift to inflexible determinate sentencing and the
passage of harsh mandatory minimum and three-strikes
laws, as well as the state's counterproductive parole
system. Unfortunately, as California's prison
population has grown, California's political
decision-makers have failed to provide the resources
and facilities required to meet the additional need
for space and for other necessities of prison
existence. Likewise, although state-appointed experts
have repeatedly provided numerous methods by which the
state could safely reduce its prison population, their
recommendations have been ignored, underfunded, or
postponed indefinitely. The convergence of
tough-on-crime policies and an unwillingness to expend
the necessary funds to support the population growth
has brought California's prisons to the breaking
point. The state of emergency declared by Governor
Schwarzenegger almost three years ago continues to
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this day, California's prisons remain severely
overcrowded, and inmates in the California prison
system continue to languish without constitutionally
adequate medical and mental health care.<1>
The court stayed implementation of its January 12, 2010, ruling
pending the state's appeal of the decision to the U.S. Supreme
Court. On Monday, June 14, 2010, the U.S. Supreme Court agreed
to hear the state's appeal in this case.
This bill does not appear to aggravate the prison overcrowding
crisis described above.
COMMENTS
1. Need for This Bill
According to the author:
Existing law gives CDCR permissive authority to adopt
cost effective reforms in its drug and medical supply
procurement processes:
Penal Code Sec. 5024:
o provides that it is the intent of the
Legislature that the Department of Corrections
and Rehabilitation, in cooperation with the
Department of General Services and other
appropriate state agencies, take prompt action to
adopt cost-effective reforms in its drug and
medical supply procurement processes, as
specified.
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<1> Three Judge Court Opinion and Order, Coleman v.
Schwarzenegger, Plata v. Schwarzenegger, in the United States
District Courts for the Eastern District of California and the
Northern District of California United States District Court
composed of three judges pursuant to Section 2284, Title 28
United States Code (August 4, 2009).
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o authorizes the Secretary of the
Department of Corrections and Rehabilitation to
adopt regulations requiring manufacturers of
drugs to pay the department a rebate for the
purchase of drugs for offenders in state custody
that is at least equal to the rebate that would
be applicable to the drug under the federal
Social Security Act.
Despite this statute, the California prison pharmacy
program was not meeting minimal standards of patient
care, and was wasting millions of dollars of taxpayer
money.
To remedy that, the Receiver asked for an independent
review from Maxor National Pharmacy Services
Corporation. The June 2006 Maxor audit confirmed the
results of several previous audits, finding a chaotic
operation lacking in inventory and purchasing
controls, and rife with medical error. Further, it
estimated that prison pharmacies cost California
taxpayers $46 to $80 million more than equivalent
prison systems.
The Receiver then hired Maxor to oversee a turnaround
of the pharmacy system. This overhaul started in
January 2007 and lasted three years, and sought to
create a patient-centered, centralized, efficient and
better organized pharmacy system for California's 33
adult prisons and nearly 175,000 inmate patients.
The Receiver and Maxor instituted a plan to reverse
these trends. The nuts and bolts of that plan are
encapsulated in AB 2747.
The framework for effective pharmacy services included
in this bill has been set in place by the Receiver.
This new framework has both improved pharmacy care and
avoided millions in pharmacy costs over the last three
years when compared to prior trend lines. Examples of
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such actions have included:
Implemented a system of targeted contracts for
formulary medications resulting in more than $36
million in savings over previous drug pricing
contracts.
Implemented a system of contract/purchasing
monitoring and interventions resulting in savings of
$8.6 million.
Reduced monthly atypical psychiatric medication
costs by almost $2 million per month.
Reclaiming more than $12 million in unused
medication through a "return to stock" process.
Negotiated and implemented a returns contract
resulting in recovery of $4.7 million in previous
drug waste.
This bill is needed to ensure this improved system
stays in place when prison healthcare is turned back
over to CDCR.
2. The Federal Prison Health Care Receivership
The inadequate provision of medical services to inmates at CDCR
prompted several class action lawsuits and court-ordered reforms
over the last several years. After "numerous experts testified
as to the 'incompetence and indifference' of prison physicians
and medical staff and described an 'abysmal' medical delivery
system where 'medical care too often sinks below gross
negligence to out-right cruelty'. . .[i]n February 2006, the
district court issued an order appointing a Receiver and
conferring upon the Receiver all of the powers of the Secretary
of the CDCR with respect to the delivery of medical care, while
concurrently suspending the Secretary's exercise of the same."
(Plata v. Schwarzenegger, 2010 U.S. App. LEXIS 8969, 5-6 (9th
Cir. Cal. Apr. 30, 2010).) The California Prison Health Care
Services (CPHCS) is a non-profit organization created to house
the activities of the federal Receiver and works at the
direction of federal Health Care Receiver, J. Clark Kelso.
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3. The California Department of Corrections and Rehabilitation
Pharmacy Services Problem
In March of 2006, then-Receiver Robert Sillen had Maxor National
Pharmacy Services (Maxor) conduct a review to identify the
actions necessary to improve the California prison pharmacy
operation. In June 2006, Maxor issued a report titled, "An
Analysis of the Crisis in the California Prison Pharmacy System
Including a Road Map from Despair to Excellence." It stated:
It is universally accepted that the effective and
efficient operation of pharmacy services is an
integral component of a quality health care service
delivery system. However, despite the recommendations
of numerous audits, external reviews and other such
evaluations, the CDCR pharmacy services operation
remains in a state of disrepair.
Among the deficiencies detailed in prior audits and
confirmed by this review are: (1) lack of effective
central oversight and leadership; (2) lack of an
operational infrastructure of policies, processes,
technology and human resources needed to support an
effective program; (3) excessive costs and
inefficiencies in the purchasing processes employed;
and (4) ineffective systems for contracting,
procurement, distribution and inventory control.
In summary, initial findings by Maxor confirm that
notwithstanding numerous state audits, studies and
evaluations followed by specific, detailed
recommendations for improvement, the CDCR pharmacy
operation remains costly, inefficient, and unsafe.
The California taxpayers continue to be denied the
most out of their pharmaceutical dollar and more
importantly, offender patients are not receiving
clinical drug therapy in accordance with quality
standards found in the community at large.
( http://www.cprinc.org/docs/projects/MaxorFinal_CDCR_Re
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port_June_2006.pdf )
4. California Department of Corrections and Rehabilitation
Pharmacy Program
According to CPHCS, pharmacy services are provided through
onsite pharmacies staffed by CDCR pharmacists and pharmacy
technicians at each prison. The pharmacists review and label
each prescription and provide the medication to nursing staff
who administer the medications to the inmate-patients. CDCR
currently spends $188 million a year on prescription drugs for
inmates and wrote about 608,000 prescriptions per month in 2009.
Actual spending on medications between 2000 and 2008 has more
than doubled. The federal Receiver states that the current
prison pharmacy program did not meet minimal patient care
standards and wasted millions of dollars of taxpayer money.
In January 2007, the Receiver entered into an agreement with
Maxor National Pharmacy Services Corporation (Maxor) to provide
pharmacy consulting services and improve CDCR's pharmacy system.
While the Receiver retained responsibility for pharmacy
operations, Maxor provided guidance to facility level pharmacy
stag to implement specified objectives. As a result, the
Receiver adopted a Road Map that contained seven primary goals
to help achieve improved outcomes in the delivery of
pharmaceuticals, which were as follows: develop meaningful and
effective centralized oversight, control, and monitoring over
the pharmacy services program; implement and enforce formulary
controls, establish a P&T Committee, and other specified
management processes; establish a comprehensive program to
monitor pharmaceutical contracting and procurement to ensure
cost effectiveness; design, construct, and operate a centralized
pharmacy facility; and design and implement a uniform pharmacy
information management system.
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According to Maxor's Monthly Summary Report for the month of
February 2009, the CDCR pharmacy program is making progress
toward implementing the Road Map goals. The report stated that
they have completed system-wide pharmacy policies and
procedures, established a revised P&T Committee, developed and
implemented enforceable Disease Medication Management
Guidelines, among other objectives. The P&T Committee continued
to meet monthly to establish a formulary, discuss and approve
Disease Medication Management Guidelines, and review and approve
pharmacy policies and procedures. Additionally, the P&T
Committee reviews and updates the formulary on a monthly basis
to achieve improved health outcomes and cost effectiveness.
Recently, the Receiver established a centralized pharmacy
distribution center in Sacramento, California, which will begin
distributing prescription drugs to its first institution in
June, one more institution in July, and two additional
institutions per month with the goal of completing all 33 sites
in 18 months.
5. Office of Inspector General Report
On April 15, 2010, the Office of the Inspector General (OIG)
issued a special report on California Prison Pharmacies, which
found missed opportunities for significant cost savings. The
report found that the pharmacy system failed to restock misused
medications, did not adhere to approved formulary medications,
had an unreliable pharmacy inventory system, and was
inconsistent in transferring inmates with medications. Overall
the report estimated that failure to restock medications costs
taxpayers at least $7.7 million and as much as $20 million per
year, while lack of adherence to the prescription drug formulary
cost at least $5.5 million in 2009. The report recommended the
Receiver take several actions to improve oversight and
accountability, which are as follows: establish and enforce
procedures to maximize the restocking of usable drugs;
development procedures to determine when to purchase unit dose
versus loose tab medications to maximize return on inventory;
and, review pharmacy staff levels to ensure adequate resources
to restock drugs. In order to improve formulary adherence, OIG
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recommended that CPHCS improve the monitoring of
over-the-counter items, identify institutions and individual
prescribers that do not adhere to formulary and rectify the
behavior, and ensure strong clinical pharmacy presence to reduce
issuance of non-formulary prescriptions. The report also made
several other recommendations regarding inventory control and
inmate transfers.
The Receiver generally concurred with many of the
recommendations in the OIG Report and stated that many of the
recommendations are currently being addressed, highlighting that
pharmacy expenditures have only increased by 2% since they
implemented the new program. Additionally, the Receiver cites
progress on both formulary and non-formulary costs through the
ongoing leadership of the P&T Committee. In 2009, 80% of
prescription drugs were currently filled using generic
medications, which achieved over $20 million in cost avoidance.
The Receiver also states that they will soon achieve more cost
savings through the implementation of Central Fill Pharmacy.
The Receiver also stated that reducing the amounts of returned
and wasted medications is a top priority and anticipates saving
$13 million through their new return-to-stock program this
fiscal year. To better address lack of oversight of pharmacy
operations, the Receiver stated that it appointed a Chief of
Pharmacy in 2009, who has direct disciplinary authority over
pharmacists who violate statewide policies and practices.
WILL IMPOSING THESE REQUIREMENTS ADDRESS THE LONG-STANDING
PROBLEMS IN PRISON PHARMACY SERVICES?
WILL THIS HELP END THE FEDERAL PRISON RECEIVERSHIP?
6. Related Legislation
AB 1817 (Arambula), also sponsored by the federal Receiver,
would require CDCR to maintain a statewide utilization
management program, ensure that each adult prison employ the
same program, and annually report to the Legislature, as
specified. AB 1817 is currently set to be heard in this
Committee on June 22, 2010.
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