BILL ANALYSIS �
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|Hearing Date:August 28, 2014 |Bill No:SB |
| |600 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Ted W. Lieu, Chair
Bill No: SB 600Author:Lieu
As Amended:August 22, 2014 Fiscal: Yes
SUBJECT: Drugs.
SUMMARY: Repeals California's electronic pedigree law to conform to
the federal Drug Quality and Security Act and declares that any
foreign dangerous drug that is not approved by the United States Food
and Drug Administration, or that is obtained outside the licensed
supply chain, to be misbranded and that anyone who purchases or sells
that drug is guilty of a misdemeanor and subject to a fine of not more
than $10,000.
NOTE : The Assembly amendments create a new bill and this measure has
been referred to the Committee pursuant to Senate Rule 29.10 (d) for
consideration. The Committee may, by a vote of the majority, either:
(1) hold the bill, or (2) return the bill to the Senate floor for
consideration of the bill as amended in the Assembly.
Existing federal 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 (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.
(21 USC 351 et seq.)
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3)Defines "illegitimate product" as a product for which credible
evidence shows that the product: (21 USC 360eee)
a) Is counterfeit, diverted, or stolen;
b) Is intentionally adulterated such that the product would
result in serious adverse health consequences or death to humans;
c) Is the subject of a fraudulent transaction; or,
d) Appears otherwise unfit for distribution such that the product
would be reasonably likely to result in serious adverse health
consequences or death to humans.
1)Defines "suspect product" to mean a product for which there is
reason to believe that such product: (21 USC 360eee)
a) Is potentially counterfeit, diverted, or stolen;
b) Is potentially intentionally adulterated such that the product
would result in serious adverse health consequences or death to
humans;
c) Is potentially the subject of a fraudulent transaction; or,
d) Appears otherwise unfit for distribution such that the product
would result in serious adverse health consequences or death to
humans.
Existing California law:
1)Establishes the practice of pharmacy and provides for the licensing
and regulation of pharmacies and pharmacists by the Board of
Pharmacy (Board). (Business and Professions Code (BPC) �� 4000 et
seq.)
2)Defines "dangerous drug" or "dangerous device" to mean any drug or
device unsafe for self-use in humans or animals, and includes the
following:
a) Any drug that bears the legend: "Caution: federal law
prohibits dispensing without prescription," "Rx only," or words
of similar import;
b) Any device that bears the statement: "Caution: federal law
restricts this device to sale by or on the order of a ____," "Rx
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only," or words of similar import, the blank to be filled in with
the designation of the practitioner licensed to use or order use
of the device; or,
c) Any other drug or device that by federal or state law can be
lawfully dispensed only on prescription, as specified.
1)Establishes California's electronic pedigree (e-pedigree) law which
creates a record in electronic form containing information regarding
each transaction resulting in a change of ownership of the given
prescription drug, including returns. (BPC � 4034 et seq.)
2)Establishes the Sherman Food, Drug, and Cosmetic Law, administered
by the State Department of Public Health (DPH), which regulates the
packaging, labeling, and advertising of drugs and devices. (Health
and Safety Code (HSC) �� 109875 et seq.)
3)Declares it unlawful for any person to manufacture, sell, deliver,
hold, or offer for sale any drug or device that is misbranded. (HSC
� 111440)
4)Declares any drug or device to be misbranded if its labeling is
false or misleading in any particular. (HSC � 111330)
5)Declares any drug or device to be misbranded unless it bears a label
containing all of the following information:
a) The name and place of business of the manufacturer, packer, or
distributor; and,
b) An accurate statement of the quantity of the contents in terms
of weight, measure, or numerical count. (HSC � 111340)
8)Declares any drug to be misbranded unless its label bears, to the
exclusion of any other nonproprietary name except the applicable,
systematic chemical name or the chemical formula, all of the
following information:
a) The established name of the drug, if any;
b) If it is fabricated from two or more ingredients, the
established name and quantity of each active ingredient,
including the kind and quantity or proportion of any alcohol, and
also including, whether active or not, the established name and
quantity or proportion of any bromides, ether, chloroform,
acetanilide, acetophenetidin, antipyrine, atropine, hyoscine,
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hyoscyamine, codeine, arsenic, digitalis, digitalis glycosides,
mercury, ouabain, strophanthin, strychnine, barbituric acid, or
any derivative or preparation of any substances contained
therein;
c) For nonprescription drugs, the quantity or proportion of each
active ingredient and the established name of each inactive
ingredient, as specified; and,
d) The requirement for stating the quantity of the active
ingredients of any drug, including the quantity or proportion of
any alcohol, and also including, whether active or not, the
quantity or proportion of any bromides, ether, chloroform,
acetanilide, acetophenetidin, antipyrine, atropine, hyoscine,
hyoscyamine, codeine, arsenic, digitalis, digitalis glycosides,
mercury, ouabain, strophanthin, strychnine, barbituric acid, or
any derivative or preparation of any substances contained
therein, shall apply to all drugs, including prescription drugs
and nonprescription drugs. For any prescription drug the
established name of the drug or ingredient, as the case may be,
on the label and on any labeling on which a name for the drug or
ingredient is used shall be printed prominently and in type at
least half as large as that used thereon for any proprietary name
or designation for the drug or ingredient.
(HSC � 111355)
9)States that any person who violates any provision of the Sherman
Food, Drug, and Cosmetic Law, if convicted, is subject to
imprisonment for not more than one year in the county jail or a fine
of not more than $1,000, or both the imprisonment and fine. (HSC
�111825)
This bill:
1)Repeals provisions of current pharmacy law to conform to the federal
DQSA.
2)Declares any foreign dangerous drug that is not approved by the FDA
or that is obtained outside of the licensed supply chain regulated
by the FDA, Board, or DPH to be misbranded.
3)Declares it a misdemeanor for any person to purchase a foreign
dangerous drug or medical device, illegitimate product, or suspect
product, as specified, that is not approved by the FDA or that is
obtained outside of the licensed supply chain regulated by the FDA,
Board, or DPH. States that a person who makes such a purchase is
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subject to imprisonment for not more than one year in county jail, a
fine of not more than $10,000 per occurrence, or both the
imprisonment and fine.
4)States that drugs imported lawfully under the federal FDCA or
pursuant to an official announcement by the FDA for certain
purposes, including clinical research, drug shortages and pandemic
influenza response, are not misbranded, as specified.
5)States that certain penalty provisions are not applicable to
individuals who the FDA has determined as having acted in compliance
with the Act regarding illegitimate or suspect products.
6)Clarifies that this bill does not preclude punishment under any
other law that provides for a greater punishment.
7)Makes other technical or clarifying changes.
8)States that no reimbursement is required by this act because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
as specified.
FISCAL EFFECT: This bill is keyed "fiscal" by Legislative Counsel.
According to the Assembly Committee on Appropriations analysis dated
August 6, 2014, this bill will result in negligible costs to Board and
unknown, potentially higher penalty revenue for misbranded drugs,
depending on enforcement.
COMMENTS:
1. Purpose. This bill is sponsored by the Author . According to the
Author , patients may be treated with drugs and devices that are
represented as FDA-approved but are often of unknown origin and
quality which can result in significant harm to these patients.
The Author notes that when a drug is illegally imported, there is
no guarantee as to the active ingredients in the drug or the
potency of the drug. Imported drugs may contain too little active
ingredient, in which case therapeutic effects will be minimized.
Alternatively, these products may contain too much active
ingredient, which can result in harm to consumers and negative
interactions with other medications. Manufacturing, storage,
packaging and transportation of imported drugs are not regulated by
the FDA. This can lead to degradation of the product and harm to
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consumers. Some imported medicines - even those that bear the name
of a U.S.-approved product - may, in fact, be counterfeit versions
that are unsafe or even completely ineffective. Some imported
medicines and their ingredients, although legal in foreign
countries, may not have been evaluated for safety and effectiveness
in the United States. These products may be addictive or may
contain other dangerous substances. Imported drugs may be labeled
in languages that American consumers do not understand and may make
medical claims or suggest specific uses that have not been
adequately evaluated for safety and effectiveness. Additionally,
imported drugs may lack information about side effects caused by
the medicine.
2. Drug Supply Regulation. The Food, Drug and Cosmetic Act (FDCA) was
passed by Congress to ensure public confidence in our drug
distribution system and to require that drugs are both safe and
effective. The FDCA requires FDA to regulate drug manufacturers
and to approve drugs for sale but also requires state governments
to regulate the drug distribution system by licensing and
regulating drug wholesalers. In the simplest situation, a
manufacturer sells drugs directly to one of the major wholesalers
who then sell the drugs to a hospital or pharmacy. However, this
simple distribution pattern is not the only distribution route
taken through the supply chain. Typically, there is more than one
wholesaler who receives the drugs before they reach the pharmacy.
These transactions include transfers between separate facilities
owned by major wholesalers and transfers between the major
wholesalers and the large drug store chains that have their own
wholesale facilities in the company distribution system. Common
carriers may transport the drugs between licensed entities and in
some cases will store, select and then ship products to pharmacies
at the direction of manufacturers.
The distribution system is further complicated by the practice of
"repackaging." Unlike European countries and Canada, most drugs in
the United States are not packaged in a "unit of use" size by the
drug manufacturers. Instead, many drugs are sold by the
manufacturers in large bulk containers and then are repackaged by
additional companies into smaller containers for resale to the
pharmacy. And the distribution system is complicated yet again by
the existence of a "secondary" wholesale market. "Secondary"
wholesalers are smaller companies (often regional down to small
family owned companies) that focus their business on selling drugs
to other wholesalers and serving smaller niche clients that are not
routinely served by the major wholesalers (individual
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practitioners, small clinics, rural locations, etc.).
Drugs routinely move between both primary and secondary wholesalers
and from pharmacies to secondary wholesalers as well. These
intermediate steps pose the greatest opportunities for compromising
the integrity of the drug distribution system. The primary threat
to system integrity is the introduction of counterfeit products.
Counterfeit drugs are most likely to be introduced into a
distribution system that involves multiple wholesalers because
drugs are largely untraceable unless they are only handled by a
major wholesaler who purchases directly from the manufacturer.
Without being able to trace a drug back, there is no assurance to
the consumer that the drug has been stored and handled
appropriately to preserve its potency and safety.
In response to a growing threat to the pharmaceutical supply chain
from counterfeit, misbranded, adulterated or diverted drugs,
California enacted SB 1307 (Figueroa, Chapter 857, Statutes of
2004) which made comprehensive changes to the drug distribution
system to protect the integrity of the pharmaceutical supply chain.
That legislation enacted the nation's strongest pharmaceutical
consumer protection measure and included provisions pertaining to
the licensure and qualifications of wholesalers, restrictions on
furnishing and the requirement, beginning January 1, 2007, of an
electronic pedigree (e-pedigree) to accompany and validate drug
distributions for the purpose of tracking each prescription drug at
the saleable unit (item) level through the distribution system.
Subsequent Board sponsored legislation, SB1476 (Figueroa, Chapter
658, Statutes of 2006) delayed the implementation date for the
e-pedigree component to January 1, 2009 and granted the Board the
authority to extend the deadline an additional two years to allow
the industry additional time to implement technologies necessary
for electronic pedigrees. In 2008, the Board sponsored SB 1307
(Ridley-Thomas, Chapter 713, Statutes of 2008), which amended the
law to resolve implementation issues, specifically staggering and
extending the implementation dates for
e-pedigree compliance, establishing grandfathering of existing
stock in the supply chain, allowing the Board to establish criteria
for inference, and preempting California's requirements in the
event federal legislation is enacted in this area. Per SB 1307,
California's e-pedigree requirements for prescription drugs would
have taken effect on a staggered basis from January 1, 2015 through
July 1, 2017: 50 percent of a manufacturer's products by 2015 would
have had to have an e-pedigree; the remaining 50 percent of the
manufacturer's products would have had to have an e-pedigree by
2016; wholesalers and repackagers would have had to accept and
forward products with the e-pedigree by July 1, 2016 and; pharmacy
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and pharmacy warehouses would have had to accept and pass
e-pedigrees by July 1, 2017.
In 2013, Congress passed and President Obama signed H.R. 3034, the
DQSA. Among other provisions, the bill created a national set of
standards to track pharmaceuticals through the distribution chain,
aimed at curbing illegal importation and patient harm caused by
counterfeit drugs and devices. The new law contained two parts -
the Compounding Quality Act and the Drug Supply Chain Security Act.
The Compounding Quality Act created a voluntary compliance regime
where compounding pharmacies that voluntarily register as
"outsourcing facilities" will be subject to oversight by the FDA in
much of the same way that traditional pharmaceutical manufacturers
are monitored.
The Drug Supply Chain Security Act built upon California's
e-pedigree efforts to create a national electronic track and trace
system for prescription drugs. The Act will replace the patchwork
system adopted by individual states and create a unified national
program. In doing this, the Act explicitly preempted any state's
requirements for tracing products through the distribution system
that are inconsistent with, more stringent than, or in addition to
any of the requirements under the Act, effectively preempting
California's e-pedigree law. This bill repeals those invalid
sections of the Pharmacy Law.
3. Counterfeit drugs. Counterfeit and unapproved drugs pose a serious
threat to consumers. Efforts to combat the use of counterfeit and
unapproved drugs have become increasingly challenging, as supply
chains have become more complex and global. According to the FDA,
nearly 40% of the drugs Americans take are made elsewhere, and
about 80% of manufacturing sites of active pharmaceutical
ingredients used in drugs manufactured inside the United States are
located in more than 150 countries.
Counterfeit drugs falsely represent a product's identity through
unauthorized representation of a legitimate trademark, trade name,
or other likenesses. Counterfeiting can apply to both branded and
generic products, and counterfeit drugs may fail to meet the
quality and safety standards established by national and state
regulatory authorities, and may contain dangerous substances,
incorrect dosages, or no active ingredient.
According to a 2013 report from the Brookings Institution, although
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data associated with counterfeit and unapproved drugs are limited
due to the clandestine nature of counterfeiting, certain trends
have emerged which may indicate that a wide spectrum of counterfeit
drugs are being manufactured and distributed. While reports of
counterfeit and unapproved drugs were initially associated with
"lifestyle drugs" (e.g., those for erectile dysfunction, weight
loss), counterfeiters have expanded into more profitable and
specialty markets, including drugs for chronic and life threatening
diseases. Investigations and seizures have revealed counterfeit
and unapproved versions of HIV/AIDS drugs, pain drugs, antibiotics,
insulin, cholesterol drugs, hormone replacement therapy, flu drugs,
cancer drugs, anti-arthritic drugs, cardiac drugs, anti-parasitic
drugs, and antihistamines. Research has indicated that in 2011,
cancer drugs represented the eighth most commonly counterfeited
medical product worldwide.
The report found that in recent years, unscrupulous distributors
have expanded their tactics to target clinical settings for the
sale of counterfeit and unapproved drugs. Medical offices are
often contacted through mass advertising campaigns via "blast
faxes," phone calls, direct email, and online marketing. These
distributors often target clinics and hospitals for sale of
physician-administered drugs, including a variety of injectable
drugs.
The report notes that most of the nationwide efforts to combat
counterfeit and unapproved products have focused on the major
players in the drug supply chain, such as drug manufacturers and
distributors. However, there have been fewer inroads in targeting
the purchasing of drugs by patients and health care professionals,
who may be lured by significantly lower prices from drugs available
outside the nationwide supply.
This bill targets this practice by clarifying in state law that a
drug that is not approved by the FDA or obtained outside of the
federal and state licensed supply chain is a "misbranded drug," and
that purchasing a misbranded drug is a misdemeanor. This bill also
increases the fine for violations from $1,000 to $10,000.
4. Related Legislation This Year. AB 2605 (Bonilla) of 2014 requires
third party logistic providers who provide storage, handling, or
distribution services, to be licensed by the California Board of
Pharmacy. ( Status : This measure is pending in the Senate.)
5. Prior Related Legislation. SB 294 (Emmerson, Chapter 565, Statutes
of 2013), expanded the types of sterile compounded drugs for which
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a license is required and requires inspection of nonresident
sterile compounding pharmacies by the Board.
SB 1307 (Ridley-Thomas, Chapter 713, Statutes of 2008) extended the
implementation dates for e-pedigree compliance, establishing
grandfathering of existing stock in the supply chain, allowing the
Board to establish criteria for inference, and preempted
California's requirements in the event federal legislation is
enacted in this area.
SB 1476 (Figueroa, Chapter 658, Statutes of 2006) delayed the
implementation date for the e-pedigree component to January 1, 2009
and granted the Board the authority to extend the deadline an
additional two years to allow the industry additional time to
implement technologies necessary for electronic pedigrees.
SB 1307 (Figueroa, Chapter 857, Statutes of 2004) required,
beginning January 1, 2007, an electronic pedigree to accompany and
validate drug distributions for the purpose of tracking each
prescription drug at the saleable unit level through the
distribution system.
6.Arguments in Support. The Healthcare Distribution Management
Association writes in support of this bill, noting that it will help
California achieve goals of ensuring that prescription medicine is
safe, secure and accessible to patients in need.
According to the Los Angeles County District Attorney's Office , "the
black market importation and distribution of pharmaceuticals and
medical devices is not only illegal but it also poses health risks
to consumers." The Office also notes that because of the
significant danger posed to consumers, especially those consumers
who are in need of life saving pharmaceuticals and medical devices,
it is important to update California law and increase the penalties
associated with this unscrupulous practice.
SUPPORT AND OPPOSITION:
Support:
Healthcare Distribution Management Association
Los Angeles County District Attorney's Office
Neutral:
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California Retailers Association
Generic Pharmaceuticals Association
National Association of Chain Drug Retailers
Pharmaceutical Research and Manufacturers of America (PhRMA)
Opposition:
None on file as of August 26, 2014.
Consultant:Sarah Mason