Cal. Code Regs. Tit. 22, § 51513.6 - Prudent Purchase of Drugs Program
(a) Prudent Purchase of Drugs is the
designated name of the mechanism through which the Department shall solicit
competitive bids or negotiate prices and enter into contracts with principal
labelers for generic drug type codes in order to obtain refunds, rebates,
guaranteed prices or any other form of preferential price under the Medi-Cal
program. The acceptance of a bid or the mutual agreement on a negotiated price
followed by the awarding and approval of a contract with a principal labeler to
supply a specific drug product shall constitute the identification of a
State-designated drug product under the provisions of this Section.
(b) Under the Prudent Purchase of Drugs
Program, the Department may:
(1) Review all
generic drug type codes marketed, at least annually.
(2) Select those generic drug type codes
which represent substantial drug product usage or expenditures under the
Medi-Cal program.
(3) For each
generic drug type code selected for inclusion under a rebate, discount or
guaranteed price contract, (1) negotiate a contract or (2) solicit competitive
price bids for multisource drugs in conformance with terms and conditions
established by the Invitation for Bid. Prior to accepting any bid or negotiated
price, the Department will seek information from the Federal Food and Drug
Administration regarding potential drug product bioequivalency, supply or other
related problems.
(A) Negotiated contracts
may be entered into for drug products marketed under an existing and valid U.S.
patent or in those instances where the Department has received an insufficient
number of acceptable bidders.
(4) Award a contract to one or more principal
labeler(s) to supply the State-designated drug product based on negotiations or
on the lowest bid(s) which meet(s) the terms and conditions of the State's
solicitation for bid. Terms and conditions for either negotiated or
competitively bid contracts shall include, but not be limited to the following:
(A) Acceptable quality, which means:
1. All drug products offered shall be
manufactured or compounded, processed, packaged, labeled, and handled in
accordance with the provisions of applicable federal and state law.
2. All drug products offered shall conform to
standards, where applicable, of the current United States Pharmacopoeia (USP)
or National Formulary (NF), including supplements or revisions.
3. The drug product shall be pharmaceutically
elegant, i.e., neatly labeled, free of chips, pittings, dye spots, foreign
matter, and other defects.
4. All
United States Drug Enforcement Agency (DEA) Schedule II-IV products shall
comply with the Health and Safety Code Section
11919.
5. All multisource drugs products (except
those drugs introduced to the U.S. market prior to 1938 or for which the United
States Food and Drug Administration has not chosen to issue ratings) shall have
an "AA" or "AB" bioequivalency rating for solid oral dosage forms, or an "A"
rating for all other dosage forms, from the FDA in its most recent edition of
Approved Prescription Drug Products.
(B) Availability, which means that the
State-designated drug product shall be available throughout the State to
outpatient pharmacies through usual and customary distribution channels in
sufficient quantities to meet the needs of the Medi-Cal program.
(C) Conformity with usual and customary
distribution channels, which means the use of drug wholesalers or direct orders
from principal labelers or any comparable combination or arrangement
thereof.
(D) Product liability
insurance, the terms of which shall indemnify the State of California, its
officers, agents and employees for any liability arising out of a claim when
such drug product is dispensed under the Medi-Cal program in accordance with
California pharmacy laws, rules and regulations and current professional
standards and practices.
(E) An
initial contract term of not less than 12 months, subject to the Department's
right to terminate the contract. Subsequent contracts may be awarded through
solicitation of competitive bids, an extension of the initial competitively bid
contract not to exceed 6 months or a renegotiation of contracts for drug
products under a U.S. patent.
(c) At least 90 days prior to the
implementation date of the contract, the Department shall notify prescribers,
dispensers, and drug wholesale organizations through provider bulletins or
other means of the establishment of a State-designated drug type code, of the
principal labelers with whom the Department has contracted for supply of same,
and of the implementation date.
(d)
(Reserved)
(e) (Reserved)
(f) The pharmacist or clinic with a special
permit shall:
(1) To the extent required by
law, dispense the State-designated product. Payment to a pharmacy or clinic
with a special permit for other than the State-designated product shall only be
for those prescriptions for which prior authorization is obtained from a
Medi-Cal consultant pursuant to Section
51003 of this Title and subsection
(g), below.
(2) Maintain
prescriptions and invoices for purchases of State-designated drug products in
accordance with Section
51476 for the purposes of audit by
the Department.
(3) Provide the
Department upon its request, information on the quantities of each
State-designated drug product on hand in the pharmacy or clinic with a special
permit as of the effective date of implementation of the contract for such
product(s) within 10 calendar days of such date. The Department shall provide
forms upon which this information shall be reported.
(g) Prior authorization shall be granted by
the Department only in the following situations:
(1) Where the clinical condition of the
beneficiary requires the use of a drug product other than the State-designated
drug product, only upon fully documented evidence of medical necessity from the
provider.
(2) Upon the request of a
pharmacy or a clinic with a special permit, when the pharmacy or clinic with a
special permit has ordered the State-designated drug product from the principal
labeler(s) or from all drug wholesalers serving the area of the pharmacy or
clinic with a special permit, as determined by the Department, and is unable to
obtain the drug product within 48 hours excluding Saturdays, Sundays and
holidays.
(h) The
Department may assess penalties against a contractor for failure to meet the
terms and conditions set forth in the contract. These penalties may include but
are not limited to:
(1) Termination of the
contract;
(2) Forfeiture of the
performance bond;
(3) Other fines
and penalties as set forth in the contract.
(i) The Department shall conduct onsite
survey reviews of pharmacy and clinic with special permit records to determine
the accuracy of data reported to the Department concerning drugs dispensed that
are subject to the Prudent Purchase of Drugs program. The Department shall
determine from such records whether prescription data submitted to the
Department supports the utilization figures used in the preparation of invoices
submitted to contractors under the Prudent Purchase of Drugs program. When
discrepancies are identified, the Department shall determine the extent to
which prior invoices need to be adjusted in order to depict the amount due to
the State by the contractors more accurately. Any adjustment calculated in
compliance with this requirement shall be applied as an offset to the next
scheduled invoices to the contractor(s).
(j) The Department may use a probability
sample in auditing pharmacies or clinics with special permits to determine the
potential amount of overcharges received by the Department from contractors
under the Prudent Purchase of Drugs program. When a probability sample is used
to determine the amount of overcharge for the universe from which the sample
was drawn, an appropriate and commonly accepted statistical procedure, such as
the ratio of means estimator, shall be used to calculate the audit findings. If
a probability sample is used to determine the amount of potential overcharges,
failure to execute the probability sampling according to accepted statistical
procedures will invalidate expansion to the universe sampled.
(1) Whenever a probability sampling method is
used to determine the amount of potential overcharge received by the
Department, the invoice adjustments to contractors under the Prudent Purchase
of Drug program shall be accompanied by a clear statement of:
(A) The specification of the universe that
was sampled.
(B) The sample size
and method of selecting the sample.
(C) The formulas and calculation procedures
used to determine the overcharged amount(s).
(D) The confidence level used to evaluate the
precision of the audit findings.
Notes
2. Amendment of subsection (b), renumbering and amendment of subsection (e) to subsection (f), renumbering of subsections (f) and (g) to subsections (g) and (h), and new subsections (e), (i) and (j) filed 9-29-83 as an emergency; designated effective 9-29-83 (Register 83, No. 44). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 1-27-84.
3. Certificate of Compliance as to 6-1-83 order transmitted to OAL 9-29-83; corrected Certificate of Compliance (subsections (a), (c) and (d) only) transmitted to OAL 10-31-83 and filed 10-31-83 and refiled 11-1-83 with original Certificate of Compliance (Register 83, No. 44).
4. Order of Repeal of 6-1-83 emergency order (subsection (d) only) filed 10-31-83 by OAL pursuant to Government Code Section 11349.6 (Register 83, No. 44).
5. Reinstatement of section as it existed prior to emergency amendment filed 9-29-83 by operation of Government Code Section 11346.1(f) (Register 84, No. 13).
6. Amendment filed 6-29-84; effective thirtieth day thereafter (Register 84, No. 26).
7. Amendment of subsections (f), (f)(3), (g)(2), (i) and (j) and NOTE filed 1-6-94; operative 2-7-94 (Register 94, No. 1).
Note: Authority cited: Section 14124.5, Welfare and Institutions Code; and Section 208, Health and Safety Code. Reference: Sections 14105.3 and 14132, Welfare and Institutions Code; and Section 4063, Business and Professions Code.
2. Amendment of subsection (b), renumbering and amendment of subsection (e) to subsection (f), renumbering of subsections (f) and (g) to subsections (g) and (h), and new subsections (e), (i) and (j) filed 9-29-83 as an emergency; designated effective 9-29-83 (Register 83, No. 44). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 1-27-84.
3. Certificate of Compliance as to 6-1-83 order transmitted to OAL 9-29-83; corrected Certificate of Compliance (subsections (a), (c) and (d) only) transmitted to OAL 10-31-83 and filed 10-31-83 and refiled 11-1-83 with original Certificate of Compliance (Register 83, No. 44).
4. Order of Repeal of 6-1-83 emergency order (subsection (d) only) filed 10-31-83 by OAL pursuant to Government Code Section 11349.6 (Register 83, No. 44).
5. Reinstatement of section as it existed prior to emergency amendment filed 9-29-83 by operation of Government Code Section 11346.1(f) (Register 84, No. 13).
6. Amendment filed 6-29-84; effective thirtieth day thereafter (Register 84, No. 26).
7. Amendment of subsections (f), (f)(3), (g)(2), (i) and (j) and Note filed 1-6-94; operative 2-7-94 (Register 94, No. 1).i
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