BILL ANALYSIS
SB 364
Page 1
Date of Hearing: July 7, 2009
ASSEMBLY COMMITTEE ON HEALTH
Dave Jones, Chair
SB 364 (Florez) - As Amended: June 23, 2009
SENATE VOTE : 21-15
SUBJECT : Health facilities: cancer centers.
SUMMARY : Prohibits an officer, director, or member of a
governing board of a general acute care hospital designated by
the National Cancer Institute (NCI) as a comprehensive cancer
center, and that accepts state funds, from holding a position as
an officer, director, or member of the board, or a similar
position, of a specified corporation. Specifically, this bill :
1)Prohibits an officer, director, or member of a governing board
of a general acute care hospital that is designated by NCI as
a comprehensive cancer center to conduct cancer research and
treatment, and that accepts state funds, from holding a
position as any of the following:
a) An officer, director, or member of the board, or a
similar position, of a "corporation that manufactures or
sells tobacco products" defined as: licensed clinics or
health facilities; pharmacies licensed pursuant to the
Pharmacy Law that derive revenue from tobacco; and, any
entity that derives more than 1% of its annual revenue from
tobacco products.
b) An officer, director, or member of the board, or a
similar position, of a corporation that has, within the
past five years, violated federal or state controlled
substances laws or regulations; or,
c) An officer, director, member of the board, or similar
position for a biopharmaceutical company that focuses on
the discovery, development, and commercialization of
therapeutic products for diseases such as diabetes and
cancer.
2)Makes legislative declarations that it is misleading for a
general acute care hospital that is designated as a
comprehensive cancer center, and that is provided resources by
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the state, to employ officers and directors who profit from
the sale and distribution of tobacco products. Finds that
such a hospital should seek to ensure that its directors and
officers do not profit from the consumption of tobacco
products, do not render services to corporations that have
violated federal or state laws, and do not engage in work that
could affect the hospital's unbiased research and review of
the efficacy of new drugs or therapeutic products for diseases
such as diabetes and cancer.
EXISTING LAW :
1)Provides for the licensing and regulation of health care
facilities, including general acute care hospitals, acute
psychiatric hospitals, and special hospitals by the Department
of Public Health (DPH).
2)Provides that an application for licensure as a health care
facility may be denied by DPH if the applicant, or a
significant officer, director, or shareholder, of an applicant
firm, partnership, corporation or public entity, has been
convicted of a crime, as defined, or knowingly makes a false
statement of fact in an application for such licensure.
3)Requires DPH to consider several factors concerning an
applicant seeking licensure of a health care facility,
including whether the applicant is of reputable and
responsible character and has the ability to comply with state
and federal licensing laws and regulations, as specified.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill is
intended to prevent cancer research and treatment facilities
that receive state funds from employing or appointing officers
and directors who hold positions in corporations that profit
from the sale and distribution of tobacco products, who hold
positions in corporations that have violated federal or state
controlled substances laws and regulations or who hold
positions in biopharmaceutical companies that focus on the
discovery, development, and commercialization of therapeutic
products for diseases such as diabetes and cancer.
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The author cites the City of Hope as an example of a cancer
research center that receives millions of dollars each year in
state funds, through the Medi-Cal program, including cancer
treatment services. The author maintains that the President
and CEO of City of Hope sits on the board of the Rite Aid
Corporation, a large drugstore chain that also sells tobacco
products in its pharmacies, and which recently agreed to pay
$5 million to settle claims of alleged violations of the
federal Controlled Substances Act. The author notes that Rite
Aid has also been targeted by several states' attorneys
general for its poor record of selling tobacco products to
minors, and has agreed to work with 20 states to enact
policies to curb this practice. The author further states
that the City of Hope is also often required as part of
federal and private grant funded activities to provide
unbiased research and review of the efficacy of new drugs or
therapeutic products for diseases such as cancer. However,
according to the author, the President and CEO of the City of
Hope sits on the board of a pharmaceutical company that
develops and produces the very drugs that the hospital is
obligated to review from time-to-time.
The author argues that the State of California advocates, as a
matter of public policy, reduction in overall tobacco
consumption - particularly consumption by minors. The author
also maintains that the state supports, through the Medi-Cal
program, health facilities that engage in cancer research and
treatment and that, therefore, it is highly unethical and
potentially unlawful for a cancer research and treatment
facility to employ officers or directors that also profit from
the sale and distribution of tobacco products.
2)ENTITIES THAT SELL TOBACCO PRODUCTS . There are a number of
entities in California that sell tobacco products. According
to 2005 data collected by the California Tobacco Survey,
convenience stores and gas stations accounted for 53% of
cigarette sales in California, liquor stores and pharmacies
accounted for 17.5%, tobacco discount stores accounted for
15%, supermarkets accounted for 5%, and other discount stores
accounted for 4%. Retailers selling tobacco products have
been subject to numerous efforts to discontinue sales of
cigarettes and tobacco products and to implement tougher
measures to guard against sales to minors. Many large
retailers, such as Target, have voluntarily discontinued
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sales.
3)PHARMACY VIOLATIONS OF THE CONTROLLED SUBSTANCES ACT . Enacted
in 1970, the federal Controlled Substances Act (CSA)
establishes procedures that must be followed by drug
manufacturers, researchers, physicians, pharmacists, and
others involved in the manufacture, distribution, prescribing,
and dispensing of controlled drugs. These procedures provide
for accountability for a drug from its initial production
through distribution to the patient, and are intended to
reduce widespread diversion of controlled drugs from
legitimate medical or scientific use. CSA creates five
Schedules (classifications), with varying qualifications for a
substance to be included in each. Two federal agencies, the
federal Drug Enforcement Administration (DEA) and the Food and
Drug Administration, determine which substances are added or
removed from the various schedules. Classification decisions
are required to be made on criteria including potential for
abuse, currently accepted medical use in treatment in the
United States and international treaties.
Earlier this year, Rite Aid and nine of its subsidiaries in
eight states agreed to pay $5 million to settle charges that
the company violated provisions of CSA. Among the allegations
that DEA lodged were that Rite Aid pharmacies had knowingly
filled prescriptions for pseudoephedrine that weren't for
legitimate medical purpose. Violations were found at Rite Aid
pharmacies in California, Kentucky, New Jersey, New York,
Maryland, Michigan, Pennsylvania, and Virginia. To settle the
charges, Rite Aid is taking several steps to ensure that it is
in compliance with the CSA, and with DEA regulations,
including auditing each pharmacy to make sure controlled
substances are secured, and implementing a system linking all
sales transactions involving pseudoephedrine or ephedrine, for
each of its retail locations.
4)NCI-DESIGNATED CANCER CENTERS . There are currently 63 medical
research centers nationally that have received designation by
NCI as cancer centers, including 10 in California that are
actively engaged in trans-disciplinary research to reduce
cancer incidence, morbidity, and mortality. The
NCI-designated cancer centers are a major source of research
on the nature of cancer and of the development of more
effective approaches to cancer prevention, diagnosis, and
therapy. The NCI-designated cancer centers also deliver
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medical treatment to patients, educate health-care
professionals and the public, and must serve underserved
populations. The centers use their federal grant funds to
foster greater interaction between basic laboratory, clinical,
and population-based medical professionals and scientists, and
provide a forum for investigators to access services and
technologies that are necessary to their research efforts.
Requests for funding from eligible institutions are subjected
to a competitive peer review process that evaluates and ranks
applications according to their merit.
5)SUPPORT . The California Medical Association (CMA) supports
this bill. CMA states that, due to the serious inherent
health risks from smoking, CMA physicians strongly discourage
smoking and support ways to restrict minors' access to tobacco
products to prevent their becoming addicted and that the
organization has long called for hospitals, pharmacies, and
other establishments where health care services are delivered
to refrain from selling or allowing the consumption of tobacco
products on its premises. CMA argues that the relationships
pondered by this bill are not only unacceptable conflicts of
interest but also are of dubious benefit to patients and may
in fact cause harm. CMA maintains that no health entity
should be affiliated with any person or entity that profits
from tobacco addiction and certainly not cancer research
hospitals.
6)OPPOSITION . The California Chamber of Commerce, the
California Grocers Association, and the California Retailers
Association are opposed to this bill. The opposition argues
that the sale of tobacco products is legal in California and
that prohibiting individuals associated with tobacco from
serving their communities is an over-reaching government
intrusion. The opposition also argues that this bill presents
a slippery slope to other legal products and forcing the
removal and barring the appointment of these individuals from
service on boards does not benefit the community.
7)OPPOSED UNLESS AMENDED . BayBio, the California Healthcare
Institute (CHI), and the Pharmaceutical Research and
Manufacturers of America (PhRMA) are all opposed unless this
bill is amended. BayBio, CHI, and PhRMA all state that, while
they are not opposed to the original portion of the bill
prohibiting a cancer center official from also serving with an
entity which derives income from the sale of tobacco products,
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they are opposed to the recently amended provisions regarding
an official's affiliation with a biopharmaceutical company.
They argue that, unlike tobacco products, there is no inherent
incompatibility between a cancer center and research underway
at a biopharmaceutical company. BayBio maintains that it is
very common for companies to establish scientific advisory
boards to provide independent analysis of company research and
development efforts. These experts, according to BayBio, who
often come from cancer centers and universities, are governed
by strict legal and ethical requirements. BayBio, CHI and
PhRMA maintain that the collaboration between academia and the
private sector are largely responsible for California's
leadership in the biopharmaceutical industry and that policies
that unnecessarily restrict these collaborations will have a
severe dampening effect on research done in California. All
three companies are opposed to this bill unless the provisions
related to biopharmaceutical companies are removed.
8)POLICY ISSUES :
a) Clinics and health facilities . The most recent amended
version applies the prohibitions in this bill to all
clinics and health facilities whether or not they derive
revenue from tobacco. According to the author's office,
this amendment was in error. To be consistent with the
author's intent, this bill should be amended to extend the
prohibition against hospital board members also serving on
the boards of clinics and health facilities only to those
clinics and health facilities that derive any revenues from
tobacco .
b) Biopharmaceutical companies . This bill prohibits
hospital board members from also serving on the boards of
"biopharmaceutical" companies. The term biopharmaceutical
is not defined in this bill and there is no link relating
to specific activities of a biopharmaceutical company, and
any hospital, that should trigger the prohibition proposed
in this bill. This provision is different from the
provision that prohibits participation on the board of a
corporation involved in the sale of a harmful substance
like tobacco. The author may wish to further address the
rationale and the purpose of the prohibition relating to
biopharmaceutical companies in this bill. The committee
might consider an amendment to focus this bill on issues
relating to conflicts resulting from tobacco product sales
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and to delete the provisions related to biopharmaceutical
firms.
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REGISTERED SUPPORT / OPPOSITION :
Support
California Medical Association
Opposition
California Chamber of Commerce
California Grocers Association
California Retailers Association
Oppose Unless Amended
Bay Bio
California Healthcare Institute
Pharmaceutical Research and Manufacturers of America
Analysis Prepared by : Tanya Robinson-Taylor / HEALTH / (916)
319-2097