Section 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.(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.Cal. Code Regs. Tit. 22, § 51513.6
1. New section filed 6-1-83 as an emergency; effective upon filing (Register 83, No. 24). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 9-29-83.
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.
1. New section filed 6-1-83 as an emergency; effective upon filing (Register 83, No. 24). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 9-29-83.
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