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Inefficiencies in Prison Pharmacy Operations Cost California Taxpayers at Least $13 Million Annually

by Mike Brodheim

Responding to concerns brought to its attention by pharmacy staff regarding the amount of medication wasted in California’s prisons, in April 2010 the Office of the Inspector General (OIG) released a special report titled “Lost Opportunities for Savings Within California Prison Pharmacies.” The OIG found that inefficiencies in pharmacy operations cost California taxpayers between $13 million and $25 million a year.

The OIG, responsible for oversight of the California Department of Corrections and Rehabilitation (CDCR), conducted an in-depth review of pharmacy practices and operations at nine CDCR facilities, including two women’s prisons, in 2009. The OIG noted, as a preliminary matter, that from 2000 to 2008 – during a time when the CDCR prisoner population increased by no more than seven percent and the cost of prescription drugs rose by only a third – CDCR expenditures on medication for prisoners more than doubled.

In terms of raw numbers, the CDCR allocated $190 million for pharmaceuticals in fiscal year (FY) 2009-2010 – slightly less than ten percent of the department’s proposed budget for medical, dental and mental health care services for prisoners that year. That’s about twice the amount that the federal Bureau of Prisons spent, and more than three times the amount spent by the Texas Department of Criminal Justice, based on prisoners’ medication cost per day.

For FY 2007-2008, the CDCR’s medication budget was just over $2 per prisoner per diem. With approximately 167,000 prisoners housed in CDCR facilities, medication expenditures for FY 2009-2010, based on the proposed budget, now appear to exceed $3 per prisoner per day.

The OIG reviewed the records of more than 100,000 prisoners over a period of three months in 2009 and found that 65 percent had received prescribed medications. Among those receiving medications, the average was 5.5 prescriptions per prisoner. Given these numbers, the OIG noted, the potential for waste – as well as the opportunity for savings – was clearly significant.

The OIG made four principal findings. First, the failure to restock all usable medication returned to the pharmacy (for example, when left behind by a prisoner who has paroled or transferred) costs taxpayers somewhere between $7.7 million and $19.6 million annually.
The average return-to-stock rate was 3.9 percent of pharmaceutical expenditures, varying among prisons from a low of less than one percent to a high of nearly 15 percent. The OIG estimated waste by extrapolating from 3.9 percent the amount that could be saved if the statewide return-to-stock rate increased to a moderate 8 percent or, alternatively, to a more efficient 14.3 percent.

Second, the OIG found that by prescribing more expensive medications (as opposed to the generic brands generally approved for use), CDCR annually spends $5.5 million more than necessary.

Third, the OIG found that CDCR’s computerized inventory system is so unreliable that pharmacy staff are forced to manually override it in order to accomplish their tasks, requiring as much as three hours of daily work (which could otherwise be spent, more productively, elsewhere).

Lastly, the OIG found that as a result of inconsistent practices, transferred prisoners generally arrive at receiving facilities with either not enough or too much prescribed medication, again wasting time and money. The audit is available on PLN’s website. See: Audit by the Office of the Inspector General for California (April 2010).

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