BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
2747 (Lowenthal)
Hearing Date: 08/09/2010 Amended: 04/26/2010
Consultant: Jacqueline Wong-HernandezPolicy Vote: Public Safety
7-0
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BILL SUMMARY: AB 2747 would require the Department of
Corrections and Rehabilitation (CDCR) to maintain and operate a
comprehensive pharmacy services program, as specified. This bill
would also: 1) Authorize CDCR to operate and maintain a
centralized pharmacy distribution center, as specified; 2)
authorize CDCR to investigate and initiate potential systematic
improvements within the department's statewide pharmacy
administration system, as specified; 3) require CDCR to ensure
that there is a program providing for the regular inspection of
all department pharmacies and documentation of compliance; and
4) require that, on March 1, 2012, and each March 1 thereafter,
CDCR report specified information regarding pharmaceutical
services to specified legislative committees.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
Pharmacy & Therapeutics Committee Likely minor, ongoing
workload General
Pharmacy Information System Future annual maintenance
costs of $63 General
Pharmacy distribution center Unknown; potential
future savings/costs General
Reporting requirement Likely minor
future workload General
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
The provisions of this bill serve primarily to codify existing
(More)
plans of the Federal Receiver to overhaul CDCR's pharmacy
services, as outlined by these provisions. CDCR prison health
care is currently in federal receivership. In 2005, the United
States District Court for the Northern District of California
established a Receivership to take control of the delivery of
medical services to all CDCR inmates. In its order, the Court
set forth comprehensive duties for the Receiver, including
leadership and executive management of the California prison
medical health care delivery system. The Court expressly ordered
the Receiver to "exercise all powers vested by law in the
Secretary of the CDCR as they relate to the administration,
control, management, operation, and financing of the California
Medical health care system." The Court suspended the
Secretary's exercise of these powers for the duration of the
Receivership. Moreover, the Court's order expressly provides
that, "all costs incurred in the implementation of the policies,
plans, and decisions of the Receiver relating to the fulfillment
of his duties under this Order shall be borne by (the state).
(The state) shall also bear all costs of establishing and
maintaining the Office of Receiver, including the compensation
of the Receiver and his staff."
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AB 2747 (Lowenthal)
To the extent that the activities outlined in the bill are
currently occurring, or will occur while CDCR medical services
remain in federal receivership, there is no new cost to the
state. Those activities will occur under the Receiver's
authority (and in the absence of statute). Thus, any increase in
workload to initiate the new processes is attributable to the
Federal Receiver's direction, and not to the bill. Similarly,
any savings achieved from the implementation of this new process
while prison health care is still in federal receivership is
also the result of the Receiver's directives and not the
codifying provisions of this bill. When the receivership ends,
enacted statute will serve to continue these policies, and any
ongoing costs or savings will result from the governing statute.
In 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.
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 Pharmacy &Therapeutics
(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. The Receiver's office has indicated that,
compared to previous cost trends before federal receivership,
its pharmacy improvements have achieved cost avoidance of
approximately $89 million General Fund over the past three
years.
As part of the pharmacy services overhaul, the Receiver
contracted to purchase the Guardian Pharmacy Information System,
an enterprise-based pharmacy operating computer system. In
collaboration with Maxor, the Receiver's staff added components
to customize the system for CDCR's needs, at a project cost of
approximately $12,000,000 General Fund. The purchase and
continued maintenance of the system is at the Receiver's
direction; this bill functionally continues the use of that
system after the federal receivership ends. The Receiver's
office has estimated that ongoing Guardian project costs would
be approximately $63,000 annually.
According to Maxor's Monthly Summary Report for 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. Additionally, the P&T Committee reviews and updates
the formulary (as required by this bill) to achieve improved
health outcomes and cost effectiveness. Recently, the Receiver
established a
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AB 2747 (Lowenthal)
centralized pharmacy distribution center in Sacramento,
California, with the goal of serving all 33 state prisons in 18
months. Thus, the design and initial implementation of the
center is not a cost that results from this bill. This bill
would authorize CDCR to operate and maintain such a center.
The true cost of a operating a centralized pharmacy distribution
center is difficult to quantify, in the event that CDCR chooses
to continue the center, because it is unclear what the cost of
an alternative model would be. CDCR must offer pharmacy services
to inmates, and the distribution center would likely achieve
cost savings over the previous disparate institution-based
systems. It is unclear whether it is the least expensive option
available to the department, or whether it would continue to be
in the future.
This bill requires CDCR to report information to the Legislature
annually regarding its progress toward specified objectives, and
its plans and progress toward continued cost avoidance. At a
minimum, the initial report (and creation of the data collection
and report structure that would support it) would be completed
under federal receivership. Any reports that may still be
required of CDCR after the receivership ends should result in
minor workload.