Cdcr Oig Report on Prison Pharmacy Operations 2010

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Special Report
LOST OPPO RTU N ITIES F OR S AVI NGS W IT HIN
CALI F O R N IA P R I S O N PHARM ACIES

Office of the
Inspector General
Dav i d R . S h aw
Inspector General

S tat e o f C a l i f o r n i a
April 2010

David R. Shaw, Inspector General

Office of the Inspector General

April 15,2010

J. Clark Kelso, Receiver
California Prison Health Care Receivership Corporation
501 J Street, Suite 100
Sacramento, California 95814

Dear Mr. Kelso:
Enclosed is the Office of the Inspector General's special report on California Prison
Phannacies.· We conducted this review under the authority of California Penal Code section
6126, which assigns the Office of the Inspector General responsibility for oversight of the
California Department of Corrections and Rehabilitation
This special report found missed opportunities for significant savings due to the failure to
restock unused medications, lack of adherence to approved formulary medications, an
unreliable pharmacy inventory system, and inconsistent practices among prisons when
transferring inmates with medications. This report contains the results of our review of
California Prison Phannacies and presents four findings and twelve recommendations.
Thank you for the courtesy and cooperation extended to my staff during the·special review.
Please call Samuel Dudkiewicz, Chief Assistant Inspector General, at (916) 830-3600 if you
have any questions.
Sincerely,

jJ,JJ/~
David R. Shaw
Inspector General
Enclosure: Special Report: Lost Opportunities for Savings within California Prison Phannacies

P.O. Box 348780,

Arnold Schwarzenegger, Governor
95834-8780 PHONE (9 16) 830-3600 FAX (916) 928-4684

SACRAMENTO, CALIFORNIA

Contents
Executive Summary..............................................................................................1
Introduction...........................................................................................................4
Background...........................................................................................................5
Parameters of Review...........................................................................................10
Finding 1...............................................................................................................12
Usable medications not being restocked in prison pharmacies cost
California taxpayers at least $7.7 million annually.
Finding 2...............................................................................................................17
Not ensuring the use of approved medications costs California taxpayers an
additional $5.5 million annually.
Finding 3...............................................................................................................20
Unreliable computer inventories in prison pharmacies result in additional
staff labor and increased costs.
Finding 4...............................................................................................................25
Inconsistent practices in handling medications for inmates who transfer
between prisons result in waste and increased costs.
Recommendations.................................................................................................28
California Prison Health Care Receiver’s Response............................................29
Office of the Inspector General’s Response..........................................................37

Executive Summary
In 2001, the Prison Law Office filed a class action lawsuit on behalf of California inmates
alleging that the state provided inadequate medical care at its prisons, in violation of inmates’
constitutional rights.
As a result of this lawsuit, in October 2005, the U.S. Northern District Court of California
imposed a Receivership on the California Department of Corrections and Rehabilitation
(CDCR) to raise the delivery of medical
care to constitutional standards. The
Findings in Brief
court suspended CDCR’s jurisdiction
The Office of the Inspector General finds that:
over prison medical health care, giving
• Usable medications not being restocked in
jurisdiction to the Receiver. The court
prison pharmacies cost California taxpayers
found CDCR prison pharmacy operations,
at least $7.7 million annually.
in particular, to be “unbelievably poor.”
• Not ensuring the use of approved medications
costs California taxpayers an additional $5.5
In January 2007, the Receiver entered
million annually.
into an agreement with Maxor National
Pharmacy Services (Maxor) to assist in
• Unreliable computer inventories in prison
implementing an action plan it had created
pharmacies result in additional staff labor and
to improve CDCR’s pharmacy operations.
increased costs.
The Receiver retains overall responsibility
• Inconsistent practices in handling medications
for pharmacy operations and Maxor is
for inmates who transfer between prisons
responsible for providing guidance to
result in waste and increased costs.
facility level pharmacy staff in order to
implement the objectives contained in
the agreement. However, a vacuum in leadership was created when prison pharmacy managers
started reporting to Maxor rather than through the Receiver’s management team who were more
familiar with the challenges and complexities of state government.
In the summer of 2009, during our regular, semi-annual inspections of CDCR facilities,
inspectors for the Office of the Inspector General (OIG) were approached by pharmacy staff
concerned about the sheer amount of wasted medication in prison pharmacies. This prompted
us to look into policies and operational controls for pharmacy management; we discovered
that controls were weak. Concerned about potential drug diversion and waste, we surveyed
additional prisons, where we found such serious operational inconsistencies that we launched
an in-depth review, selecting nine prison pharmacies as the sites of our close review.
This report highlights the results of our review and focuses on waste in prison pharmacy
operations in four areas: the failure to restock millions of dollars in unused medications each
year; the lack of adherence to the formulary, which is an approved list of medications, resulting in
millions of dollars overspent on medications each year; the functionally unreliable computerized
pharmacy inventory system that bears no relation to the actual stock of medications at any
prison pharmacy; and the inconsistent practices among prisons when transferring inmates with
medications, resulting in excess medications that are most often destroyed.
State of California • April 2010

Page 1

Contrary to expectation, there are almost no procedures for identifying and restocking
medications. This managerial void costs taxpayers at least $7.7 million, and very likely close
to $20 million, every year. In addition, due to the absence of oversight, CDCR clinicians
routinely prescribe non-formulary medications, costing taxpayers at least another $5.5 million
in 2009 alone.
Additional costs are incurred for staff time as pharmacists find ways around the state-wide
computerized inventory system, a system so unreliable that pharmacists prefer to rely on
handwritten tallies. And in the absence of consistent medication transfer procedures when
inmates are transferred among prisons, prison pharmacies routinely generate unnecessary
prescription refills, which are often destroyed. Since over 100,000 inmates on medications are
transferred among CDCR prisons each year, with each of those inmates receiving an average
of 5.5 prescription medications, the costs of filling and destroying unnecessary and unused
prescriptions are tremendous.

Recommendations
In this special report, the Office of the Inspector General shines a public light on specific areas
lacking oversight and accountability in CDCR’s pharmacy operations resulting in millions of
dollars in unnecessary costs to the taxpayers.
To address the deficiencies identified in this report, the California Prison Health Care
Receivership Corporation should take the following actions:
Medication Restocking

• Establish and enforce procedures to maximize the restocking of usable drugs.
• Develop guidelines to determine when to purchase unit dose versus loose tab medications
to maximize the return of drugs to pharmacy inventory, and monitor purchases to ensure
compliance.
• Review existing staffing levels within pharmacies to ensure that adequate resources are
available to restock drugs to inventory.

Formulary Adherence

• Monitor the prescribing of over-the-counter items that have a limited medical necessity and
develop processes to limit prescribers’ ability to provide such items.
• Identify institutions and individual prescribers that consistently do not adhere to the
formulary and provide instructions to rectify the prescribing behavior.
• Ensure that there is a strong clinical pharmacy presence at prisons to provide training and
direction to reduce the use of non-formulary prescriptions, maintain accurate inventories,
and promote efficiencies.

Bureau of Criminal Investigations, Office of the Inspector General

Page 2

Inventory control

• Develop and implement procedures to ensure an accurate computer inventory system in
order to monitor inventory shrinkage, reduce staff labor, provide accurate management
reports, and provide accountability.
• Provide guidance to pharmacy staff on how to use the computer inventory system to
account for medications dispensed to prison hospitals.
• Ensure that the auto-refill and auto-reorder systems work effectively without manipulating
the electronic inventory.

Inmate transfers

• Monitor transferring inmates and identify any prisons that are not forwarding medications
to the receiving prison; identify the cause of the failure to follow procedure and take
appropriate action.
• Ensure that prisons transferring inmates to other institutions take into account the quantity
of previously dispensed medications before requesting a three-day supply from the
pharmacy, and monitor for compliance.
• Develop a procedure to ensure that the receiving institution’s pharmacy does not refill
medication before it is necessary, and monitor for compliance.

State of California • April 2010

Page 3

Introduction
This report presents the results of a review of pharmacy operations in California Department
of Corrections and Rehabilitation (CDCR) prisons. The Office of the Inspector General (OIG)
originally became aware of concerns regarding pharmacy operations during our regular, semiannual inspections of CDCR facilities.
During the summer 2009 institutional inspections, pharmacy staff showed OIG inspectors
substantial quantities of returned medications awaiting disposal which pharmacy staff believed
could be reused. This prompted OIG inspectors to inquire about operational controls along
with policies and procedures for handling medications returned to the pharmacy. The lack
of controls raised concerns about potential drug diversion and waste. Consequently, we
surveyed additional prison facilities and found operational inconsistencies among the various
prison pharmacies in the packaging and restocking of medications, in inventory control, in the
medication transfer process, and in maximizing the use of the CDCR formulary.
The OIG conducted this review under the authority of California Penal Code section 6126,
which assigns the OIG responsibility for oversight of the CDCR.
Photo 1: Unused medication returned to a pharmacy from facility clinics.
Source: Office of the Inspector General.

Bureau of Criminal Investigations, Office of the Inspector General

Page 4

Background
History of CDCR’s Pharmaceutical Program

CDCR provides for the custody and care of approximately 167,000 inmates, which includes
pharmacy services at each of the 33 adult prisons. Between 2000 and 2005, CDCR’s
management of its pharmacies has been the focus of several audits and reviews, all of which
have identified major issues that impede pharmacy operations. Even though the auditing
agencies made recommendations for improvement, CDCR routinely failed to implement
meaningful changes. This failure contributed to a class action lawsuit filed in 2001 by the
Prison Law Office on behalf of California inmates alleging that the state provided inadequate
medical care at its prisons, in violation of inmates’ constitutional rights.
In October 2005, the U.S. Northern District Court of California imposed a Receivership on
CDCR to raise the delivery of medical care to constitutional standards. The court determined
that the management of prison pharmacy operations was “unbelievably poor.” The court found
that there was no statewide coordination among pharmacies and no statewide pharmacist to
provide centralized oversight, control, and monitoring of the pharmacy program. The court
also found that the failure to transfer medications among prisons or to accept prescriptions
from other institutions disrupts the continuity of medical care and results in waste.
The court order appointing the Receiver outlined the Receiver’s duties in restructuring
CDCR’s medical delivery system. The Receiver was required to develop a plan of action that
included goals, tasks, and metrics, and was required to make progress reports to the court. The
court gave the Receiver the powers necessary to fulfill those duties.
At the same time, and for the duration of the Receivership, the court suspended the Secretary of
the CDCR’s jurisdiction over prison medical health care. The Secretary, however, was ordered
to assist with the accomplishment of the Receiver’s duties.
The Receiver’s action plan includes the objective to “establish a comprehensive, safe and
efficient pharmacy program.” In March of 2006, then-Receiver Robert Sillen requested that
Maxor National Pharmacy Services (Maxor) conduct a review to identify the actions necessary
to improve the California prison pharmacy operation.
In June 2006, Maxor concluded its review and issued a report titled, “An Analysis of the
Crisis in the California Prison Pharmacy System Including a Road Map from Despair
to Excellence.” In this report, Maxor asserted that the “CDCR pharmacy program
does not meet minimal standards of patient care, provide inventory controls or ensure
standardization.” Maxor found:
• Lack of centralized oversight and coordination among pharmacies, resulting in poor
management controls.
• Lack of an effective clinical management process to ensure medically-appropriate and costeffective treatment through use of the drug formulary.
State of California • April 2010

Page 5

• Lack of consistency in ordering and managing inventory.
• Lack of an electronic information system capable of medication monitoring and cost
containment.
In addition to outlining numerous deficiencies in the program, the Maxor report included a
plan for improving the CDCR pharmacy operation. The plan, which incorporated many of
the recommendations from previous audits, consists of seven goals along with measurable
objectives to achieve those goals. An abbreviated description of the goals follows:
• Develop meaningful, effective centralized oversight, control and monitoring of the
pharmacy program.

• Implement and enforce effective clinical management processes (including formulary
controls, a pharmacy and therapeutics committee, disease management guidelines and
regular audits).
• Review, audit, and monitor pharmacy contracting and procurement for cost efficiency.
• Develop a pharmacy human resource program.
• Redesign and standardize institution pharmacy drug distribution, including development of
a centralized pharmacy.
• Design and implement a uniform pharmacy information management system.
• Develop processes to ensure that pharmacy accreditation standards are met.
In January 2007, the Receiver entered into a contractual agreement with Maxor to provide
management consulting services to the prisons’ pharmacies. This agreement included
an operating budget for Maxor of just over $15,000,000 for the three-year period of the
contract from January 1, 2007 to December 31, 2009. Two subsequent revisions to the
original agreement resulted in changes to the scope, a one-year extension, and a total
revised budget of almost $40,000,000. Although Maxor is responsible for providing
guidance to facility level pharmacy staff in order to implement the objectives contained
in the agreement, Maxor is under the direction of the Receiver, who maintains overall
responsibility for the delivery of medical services, including pharmacy operations.
However, when prison pharmacy staff contacted the Receiver’s office to resolve issues,
they were re-directed to Maxor; this created confusion regarding the management structure
of pharmacy operations.
In its original agreement, Maxor developed seven goals and numerous objectives for improving
pharmacy operations. The majority of the objectives related to our findings were scheduled for
completion during the first 12-24 months, or by December 31, 2008.
Pharmacy Costs

In the past decade, the amount of money spent annually on medications for California’s inmates
between 2000 and 2008 (the latest year for which we had complete data) has more than doubled.
Bureau of Criminal Investigations, Office of the Inspector General

Page 6

Figure 1: Cost for pharmaceuticals per inmate per day.
Compared with two other large correctional operations and adjusting CDCR for pricing differentials,
CDCR spends two and three times as much per inmate per day on medications.

$1.91

$0.59

$0.83

$2.04

$0.67

$0.83

CDCR
2006/2007

Texas
Dept. of
Corrections
2006/2007

Federal
Bureau of
Prisons
2006/2007

CDCR
2007/2008

Texas
Dept. of
Corrections
2007/2008

Federal
Bureau of
Prisons
2007/2008

This is far greater than the seven percent increase in the inmate population at its peak and the
33 percent increase in the cost of prescription drugs over the same time period (See Figure 2 on
page 8). However, during the last two years (2007-2008), the rate of increase is significantly less
than the previous three years. Facility pharmacy staff attributed this improvement to better drug
purchasing contracts negotiated by Maxor and the Receiver.
For the fiscal year 2009-2010 Governor’s budget, CDCR proposed to spend close to $2 billion
to provide medical, dental and mental health care services to California’s inmates. Almost 10
percent of that amount, $190 million, is allocated for pharmaceuticals. In comparing California
with other large correctional operations for fiscal years 2006/2007 and 2007/2008, we find
that the daily pharmaceutical cost per inmate is significantly higher at CDCR (see Figure 1).
Even after adjusting CDCR’s cost per inmate downward to account for preferential pricing
advantages that Texas and the Federal Bureau receive, CDCR spends more than two times the
amount that the Federal Bureau of Prisons spends per inmate per day on medications, and more
than three times the amount spent by the Texas Department of Corrections.
In reviewing data for approximately 111,000 inmates in July, August and September of 2009,
we found that 65 percent or 73,000 inmates received 403,000 prescribed medications. These
73,000 inmates averaged 5.5 prescriptions per inmate. Given the amount of money and the
number of prescriptions involved, the potential for waste is significant.
Pharmacy Operations and Medication Delivery

Each prison pharmacy is under the direction of a Pharmacist-In-Charge, employed by CDCR,
who is referred to as a lead pharmacist for the purposes of this report. The lead pharmacist has
State of California • April 2010

Page 7

oversight and supervision of the storage, distribution and control of all prescription medications.
Each pharmacy uses an electronic database to assist in tracking orders placed, medications
received, medications dispensed, and medications returned. In addition to electronically
recording medications purchased and drugs dispensed, physical inventories are conducted.
The lead pharmacist purchases medications to stock the prison pharmacy and fill prescriptions.
Depending on the type of medication, the lead pharmacist facilitates the purchase of
the medication in either prepackaged unit doses or in loose tablets. Policy requires that
pharmacists substitute generic medication—drugs no longer protected by a patent—for
patented name-brand medication, unless otherwise specified. However, it is health care
providers that determine which medication is prescribed to the patient. They can specify any
medication in their prescriptions, including name-brand medication, by submitting a nonformulary drug request to prescribe a drug not listed on the CDCR drug formulary.
The drug formulary is a list of approved medications, many of which are the generic versions
of name-brand medications. Provided to all CDCR licensed medical professionals, the drug
formulary is developed by CDCR’s Pharmacy and Therapeutics Committee to help clinicians
provide medically appropriate and cost effective treatment. The Pharmacy and Therapeutics
Committee consists of medical, dental, nursing, psychiatry and pharmacy staff as well as
court-appointed experts from the Coleman (mental health) and Perez (dental) lawsuits. Only
this committee can add or delete items from the formulary. Since formulary medications cost,
on average, 65 percent less than non-formulary medications, adherence to the formulary to the
extent possible can result in considerable cost-savings to CDCR.
The lead pharmacist supervises the pharmacists and pharmacy technicians who prepare and
dispense medications upon orders from appropriately licensed medical professionals. After
Figure 2: Comparing rates of change, 2000 - 2008.
From 2000 to 2008, CDCR more than doubled its spending on inmates’ medications, yet the total
inmate population increased only seven percent at its peak. During that same period, the cost of
prescription drugs rose only by a third.
120%

Percentage
of change

90%

60%

30%

0
-10%

CDCR pharmeceutical expenditures
CDCR prison population changes
Consumer price index of prescription drugs

2000
0
0
0

2001
19.56
-0.31
5.43

2002
36.45
-2.48
10.9

2003
39.75
-0.66
14.33

2004
39.07
0.93
18.11

Bureau of Criminal Investigations, Office of the Inspector General

2005
58.42
1.35
22.28

2006 2007 2008
88.71 100.34 106.40
6.52
6.98
5.54
27.51 29.35 32.55

Page 8

a medication is dispensed, it is then sent to the designated housing unit clinic for delivery to
the inmate. For certain medications, the entire prescription is given to the inmate to take as
directed. Other medications are kept in the facility medical clinic, where a nurse provides
the medication to the inmate and observes the inmate take the medication. This medication
delivery method is called Direct Observation Therapy (DOT).
If, for some reason, medication is unused by an inmate, it is to be returned to the pharmacy for
disposition. When medication is returned to the pharmacy, pharmacy staff determine whether
it should be returned to inventory (restocked), returned to the manufacturer for partial credit, or
incinerated. Restocking of medications involves consideration of:
• Delivery method – only medication that remained in the control of health care staff can be
considered for restocking.
• Type of packaging and storage – whether the medication is in unit dose packaging or loose
tablets and stored in a manner as to ensure it has not been adulterated or that the efficacy of
the medication has not been compromised.
• Expiration date.
When inmates transfer in and out of an institution, a coordinated effort among custody staff,
health care staff and pharmacy staff is required to ensure that required medication accompanies
each transferring inmate. When inmates transfer between CDCR prisons, they are required to
have at least a three-day supply of their prescribed medications. If there is less than a threeday supply of already dispensed medication available prior to transfer, the pharmacy is to be
notified to provide a minimum of a three-day supply. Upon an inmate’s arrival at the receiving
institution, health care staff verify the receipt of medication; the pharmacy receives the
transferred prescriptions and makes medication available.

State of California • April 2010

Page 9

Parameters of Review
This review was conducted to determine whether California ’s state prison pharmacies
effectively manage the expenditure of state funds for the distribution of medications to inmates.
Although there are seven goals and numerous accompanying objectives contained in Maxor’s
action plan and CDCR has reportedly met objectives in some areas, our review does not
address all seven goals. Our report focuses specifically on the issue of waste, which has
considerable cost implications for CDCR and, more importantly, California taxpayers. This
report focuses on four areas: inventory control, inmate transfer medications, the return to
stock of unused medications, and the practice of formulary adherence. These are the areas of
primary concern brought to our attention by pharmacy staff during facility inspections.
We surveyed 16 prison pharmacies, which included reviewing management reports and
interviewing pharmacy, medical and custody staff to identify potential problems and their
impact on pharmacy operations. As a result of our survey, we selected nine prisons to perform
a more in-depth review of pharmacy operations. The nine prisons were:
• California State Prison, Corcoran

• California State Prison, Sacramento
• California Substance Abuse Treatment Facility and State Prison, Corcoran
• Central California Women’s Facility
• Deuel Vocational Institution
• Mule Creek State Prison
• Pleasant Valley State Prison
• Salinas Valley State Prison
• Valley State Prison for Women
In the process of performing this review during the second half of 2009, we:
• Interviewed pharmacists, pharmacy staff, custody and other related medical staff.
• Reviewed the medication restocking process in which prescribed medications not picked up
by inmates can be placed back into inventory.
• Reviewed inventory reports and manually counted selected pharmaceutical medications.
• Reviewed the auto-reorder procedures where medications are automatically reordered when
the inventory runs low.
• Reviewed the auto refill procedures where an inmate’s prescription is automatically refilled.

Bureau of Criminal Investigations, Office of the Inspector General

Page 10

• Reviewed the non-formulary request process whereby prescribers order medications that
are not on the formulary list.
• Reviewed the transfer process where medications are sent with inmates when they are
transferred from one prison to another.
Based on our analysis of the data collected, we developed four findings and twelve
recommendations regarding the management of pharmacy operations.

State of California • April 2010

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Finding 1
Usable medications not being restocked cost California taxpayers
at least $7.7 million annually.
Due to lack of direction and oversight, CDCR pharmacies have lost taxpayer money by
failing to restock returned medications. We estimate that not maximizing the restocking of
medications costs taxpayers at least $7.7 million annually.
Unused medications may be returned to the pharmacy for a number of reasons. For example,
unused medications are returned when they are refused by the inmate, or when left behind after
an inmate is paroled or transferred to another institution. Pharmacy staff evaluate the unused
medication to determine whether it
Photo 2: Returned unused medication waiting to be sorted.
should be incinerated, returned to
Because many pharmacies lack the staffing to sort
inventory (restocked), or returned to the
returned medication for possible restocking, returned
manufacturer for partial credit. While
medications are often incinerated. Source: Office of the
many of the returned medications
Inspector General.
are routinely destroyed, they could
be restocked and re-dispensed if they
meet certain conditions involving their
packaging and distribution thereby
saving millions of dollars.
Depending on the medication,
the pharmacy normally dispenses
medications in one of two delivery
methods. Some medications are
picked up by the inmate for use as
prescribed. Other medications require
direct observation therapy (DOT),
in which nursing staff gives the
medication to the inmate and observes
the inmate take the medication. Prison
pharmacies typically provide the
DOT medications either in unit dose
packaging (pills individually wrapped
by the manufacturer) or in loose
tablets placed in baggies by pharmacy
staff. DOT medications that have
been dispensed to nursing staff but
are unused can possibly be restocked;
however, medications picked up
by inmates, irrespective of their
packaging, cannot be restocked.
Bureau of Criminal Investigations, Office of the Inspector General

Page 12

Photo 3a, 3b: Unit dose medication and loose medication.
Under certain circumstances, unused unit dose medication may be restocked for later use. Unused
loose tablets of medication are usually not restocked. Source: Office of the Inspector General.

Appropriate direction is not provided to prison pharmacies to minimize waste

Although a computerized inventory system has been implemented by the Receiver to “track
returned medications and re-circulate returns when possible to maximize inventory value,”
the Receiver’s policy regarding the disposition of medications returned to the pharmacy did
not describe when a medication could be restocked. Instead, it provided guidance on when a
medication could not be restocked. According to the policy, a medication cannot be restocked
if it is past the expiration date, contaminated, mislabeled, or recalled. As a result, there is no
uniform protocol to channel returned medication back into prison pharmacy stock.
However, some of the pharmacists we spoke to have developed criteria for identifying
medications that can be restocked. The consensus among these pharmacists was that returned
medications could be restocked if they:
• had been continually maintained by a health care professional only and;
• are packaged as unit dose, unadulterated and;
• have not expired as indicated by the manufacturer’s expiration date.
Although purchasing medications in unit dose packaging facilitates medication restocking and
therefore facilitates savings, other variables in purchasing also affect savings. To determine
the difference between the costs of purchasing in unit dose packaging versus loose tablet form,
we selected eight medications that were commonly restocked; four were name brand and four
were generic medications. We found that there is no difference in the cost of name brand
medications when purchased in either unit dose packaging or in loose tablet form. Generic
medications, however, on average doubled in cost when purchased in unit dose packaging.
Therefore, when ordering medications, pharmacists must consider the availability and cost of
unit dose packaging, compared with loose tablet form, in both name brand medications and
generic medications.

State of California • April 2010

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When a pharmacist was asked
In discussing with pharmacists how they determine whether to
why he only purchased loose
purchase medications in unit doses or in loose tablet form, we
tablet drugs, he responded:
found significant inconsistencies among purchasing practices.
“Because that is just the
Pharmacists did not take into account both the medication’s
way we have always
initial cost and the ability to restock the medication. Although
our sample indicates that name brand drug manufacturers charge purchased our drugs.”
the same price for either unit dose packaging or loose tablets,
— Lead Pharmacist
several pharmacists preferred to buy loose tablets because they
believed that they were choosing the less expensive option. They explained that loose tablets
have historically been less expensive than unit dose packaging. Other pharmacists noted that
they buy medications in loose tablets because loose tablets take up less space on their shelves,
and that space is a critical factor in their particular pharmacies (photo 4). These pharmacists
also told us that although they were encouraged to purchase drugs in unit dose packaging, they
had not been given any verbal or written directives.

Pharmacies do not evaluate returned medications in a timely manner

Some pharmacies incinerate returned unit dose medications because the pharmacy staff does
not evaluate the returned medications in a timely manner. The evaluation process includes
sorting the returned medications according to whether they are to be destroyed, returned to
the manufacturer for partial credit, or restocked. We observed large quantities of returned
medications stored in tote bins and plastic bags, waiting to be sorted.
Several of the pharmacists said they did not have adequate staffing to sort the returned
medications. These pharmacists estimated that it would take 20 to 60 hours of staff labor
per month to sort returned medications, but explained that they have no control over their
staffing. The pharmacists claimed that the focus was primarily on filling and completing the
inmate prescriptions, rather
Photo 4: Loose tablet medications stored in bulk.
than on sorting returned
Adequate space to store medications is a concern at many prison
medications. We did not
pharmacies. Source: Office of the Inspector General.
verify these pharmacists’
assertions; however, the
large quantities of unsorted
returned medications indicate
ineffective oversight of
the pharmacies’ restocking
processes.
Even without additional
resources or assistance
though, some pharmacists
changed their staff’s
responsibilities and
successfully demonstrated
how medications could be
restocked.
Bureau of Criminal Investigations, Office of the Inspector General

Page 14

One pharmacist told us that he addressed
the staffing shortage in his pharmacy by
authorizing overtime for pharmacy staff to
sort returned medications. This pharmacist
estimated that sorting returned medications
at his pharmacy takes 20 hours and costs
approximately $500 per month in overtime,
but he believes that paying the overtime
is justified by the savings derived from
returning the drugs to stock. To illustrate
his point, he noted that during a three-month
period in 2009, his pharmacy reported
$191,000 in drugs returned to stock at a cost
of approximately $1,500 for overtime.

Photo 5: Typical shelving of bulk and unit dose
pharmaceutical stock.
Bottles contain up to 1,000 pills while unit doses
are typically ten to a card. Source: Office of the
Inspector General.

Another pharmacist made sorting returned
medications part of the daily duties for his
pharmacy staff. He reported $235,000 in
medications returned to stock during the
three month period from April through June
2009. In comparison, another pharmacy of
comparable size in pharmaceutical purchases
that didn’t make sorting a priority reported
only $14,000 in medications returned to stock
during the same period.
Such differences in results suggest that the intended objective of ensuring that all pharmacies
maximize their restocking of medications was not met.
Certain pharmacies achieve higher restocking rates by purchasing in unit dose forms and
focusing on restocking

Based on our review of pharmacy reports, we noted that some pharmacies had higher rates
of restocking medications than other pharmacies. We found that the pharmacists at the
high-restocking rate pharmacies purchased medications in unit dose form, which facilitated
the restocking of the drugs back into the pharmacy’s inventory, and that they incorporated
restocking responsibilities as part of their staff’s duties.
We reviewed the return-to-stock data for twenty prisons for the period of April through
June 2009. For those twenty prisons, the average return-to-stock rate was 3.9 percent of the
pharmaceutical expenditures for that three-month period. The range of the return-to-stock
percentage varied greatly from a low of .05 percent to a high of 14.87 percent. If we project
the 3.9 percent to the total pharmaceutical expenditures of $188 million for 2008-2009, the
amount of the return to stock would be $7.3 million.
On September 2 and 3, 2009, we visited three prisons and had in-depth discussions with
State of California • April 2010

Page 15

pharmacy staff regarding their restocking procedures. Following our visits, these three prisons
immediately increased their return-to-stock percentage. The data from return-to-stock reports
included in Figure 3 below show return-to-stock rates for these institutions before and after our
visits. The return-to-stock rate for August at these institutions was less than ½ of one percent;
however, after our visit, the return-to-stock rate increased to more than 8 percent for the month
of September. Given that the restocking applied to medications purchased before our visits, it
is unlikely that there were any significant changes in the packaging of the medications. These
increases resulted directly from our review.
The financial implications are significant. If the average return-to-stock percentage at all
CDCR prison pharmacies statewide were to increase from 3.9 percent to 8 percent, which
we believe is a conservative number, the increased restocking would generate an additional
savings of $7.7 million. Moreover, additional data we gathered indicate that the savings from
restocking could be even higher. We evaluated three other prisons specifically because their
pharmacists had already made restocking a priority. We analyzed their return-to-stock data for
different periods in 2009 and found that those pharmacies had an even higher average returnto-stock rate of 14.3 percent. If the statewide return-to-stock rate were to increase from 3.9
percent to 14.3 percent, the increased restocking would generate a savings of $19.6 million.
In addition to seeing an increase in restocking values after our site visits, we learned that the
policy on returned medications was clarified during an October, 2009 meeting with the lead
pharmacists. However, there was no reference to the need for uniform purchasing practices
that take into account initial costs and the ability to restock medications, or to the need for the
timely processing of returns.

Figure 3: Savings from procedural changes in restocking
Central California Women’s Facility

California State Prison Los Angeles
Valley State Prison for Women
$64,223

$60,000
$47,016
$34,960

$30,000
$11,104

$10,000
0

$616 $810

Monthly
Totals

June 09
$1,878

$451 $1,016

$1,731
July 09
$13,850

$5,034

$207 $1,751

August 09
$6,992

Bureau of Criminal Investigations, Office of the Inspector General

September 09
$146,199

Page 16

Finding 2
Not ensuring the use of approved medications costs California
taxpayers an additional $5.5 million annually.
CDCR spent $5.5 million more than necessary as a result of health care providers prescribing
non-approved medications. The expenditures for non-approved medications have increased
significantly because medical staff ignore approved medical alternatives or prescribe items
that have a questionable medical necessity. In addition, there is inconsistent oversight of nonapproved medication expenditures.
The list of approved medications is referred to as a formulary. This list represents the
collective clinical judgment of CDCR’s Pharmacy and Therapeutics Committee for the
treatment of disease and the prevention of illness. It is a tool to
“There is a lot of waste in
assist health care providers to prescribe treatment that is both
non-formulary items.”
medically appropriate and cost effective. Because the Food and
Drug Administration authorizes a number of new medications,
— Lead Pharmacist
alternative preparations for existing medications, and over-thecounter combinations of medications each year, medical and
mental health professionals can use a formulary to ensure they are providing cost-effective
medications that are therapeutically appropriate.
There are occasions when physicians need to prescribe medications that are not on the formulary.
In some cases, formulary agents are ineffective or not tolerated by the patient. In addition, the
only available drug to treat a specific condition may be a non-formulary selection. In these
cases, the medical or mental health care professional is expected to make a written request to
their supervisor justifying the non-formulary medication as a clinically prudent choice. The
medical or mental health supervisor then either approves the request or suggests an alternative.
Photo 6: An example of a prescription item.
Items available over the counter outside of prisons are prescribed
to inmates. Some of these items are not on the formulary because
they may not be considered medically necessary. Source: Office
of the Inspector General.

State of California • April 2010

Page 17

During the course of our review, the OIG analyzed prescription information for 24 prisons for
the months of July, August and September, 2009. Our analysis revealed that the average amount
spent on non-formulary prescriptions was approximately $2,200,000 per month for the 111,000
inmates in our sample, or $19.85 per inmate per month (PIPM). In 2007, the amount spent on
non-formulary prescriptions was $19.76 PIPM and CDCR successfully reduced that rate to
$14.98 PIPM in 2008. However, in 2009, the rate increased by almost a third over the previous
year to $19.85 PIPM.
The need to minimize the amount of non-formulary use is because non-formulary prescriptions
are typically significantly more expensive than formulary prescriptions. During the months
of July, August and September, 2009, the average cost of a formulary prescription for the 24
prisons was 35% of a non-formulary prescription ($30.54 compared to $86.74). As a result,
if the average PIPM rate for non-formulary prescriptions for 2009 stayed at the same rate as
2008, adjusted for inflation, and the medications were prescribed off the formulary, we estimate
CDCR would have saved in excess of $5.5 million.
In addition, health care providers write prescriptions for many items that are not included on
the formulary because they have limited medical necessity. Items such as sunscreen, fish oil,
vitamin E, and cough drops, which are sold over-the-counter outside of the prison environment,
are often prescribed for inmates who would have difficulty accessing these items in prison.
However, some of the items we found, such as the sunscreen (photo 6), could be available in
the canteen.
In its 2006 analysis of CDCR’s pharmacy
system, Maxor found that there was a lack
of adherence to the existing formulary,
observing that

Photo 7: This binder shows 760 non-formulary
requests at one prison over a two month period.
Source: Office of the Inspector General.

(s)ystem-wide policies and procedures
for a formulary are established, but left
open to institution level interpretations
and compliance … . In short, while the
CDCR health services central office states
that updated policies and procedures
and formulary have been implemented,
institution level observations revealed
that in many cases, guidelines are not
followed and prescribing practices
follow individual institution developed
formularies and treatment approaches.
With the absence of central office
oversight, compliance and monitoring are
difficult at best.
In an effort to correct this issue, Maxor
included two goals in its action plan: A) to

Bureau of Criminal Investigations, Office of the Inspector General

Page 18

develop meaningful and effective centralized oversight, control
and monitoring over the pharmacy services program, and B) to
implement and enforce clinical pharmacy processes including
formulary controls.

“Over here we do a lot
of non-formulary, and it
seems like every request
for non-formulary gets
approved. We very rarely
see one denied, so I
The plan for ensuring formulary compliance included 1)
think the process needs
reconstituting the Pharmacy and Therapeutics Committee, 2)
to be looked at. 99.9%
issuing an up-to-date formulary along with the related policies
and procedures, 3) developing a monitoring tool, and 4) creating are approved, only three
denials in two years.”
a group of clinical pharmacy specialists who would conduct
reviews of formulary adherence at each institution and provide
— Lead Pharmacist
feedback at both the regional and institutional level. While the
Receiver successfully implemented the first three objectives,
the monitoring function was never fully implemented due to budget reductions eliminating the
positions in 2009, midway in the implementation of the new pharmacy program. Elimination
of these positions has contributed to the inconsistent oversight of non-approved medication
expenditures.

State of California • April 2010

Page 19

Finding 3
Unreliable computer inventories in prison pharmacies result in
additional staff labor and increased costs.
Concern over pharmacy inventories is not new to CDCR. In its 2006 review of CDCR
pharmacies, Maxor noted significant inventory problems, noting that “based on a sampling
of selected medications, it appears that millions of dollars of purchased medications are not
accounted for in the prescription dispensing data.” In the same report, Maxor observed, “Such
disturbing variances (in excess of 30%) indicate a serious lack of pharmacy management and
inventory control, as well as a high level of waste and potential for drug diversion.”
Maxor’s solution to the inventory problem is laid out as a goal in its pharmacy implementation
plan, whereby Maxor proposed that “[a] computerized perpetual inventory system with
integrated reclamation software will be utilized to achieve inventory control, monitor
diversion, increase inventory turns, track returned medications, and re-circulate returns when
possible to maximize inventory value.”
The purpose of this goal was to “implement a perpetual inventory system in which dispenses
are subtracted from inventory in real-time and daily inventory orders are automatically posted
to the individual pharmacies’ inventory.”
The GuardianRx computerized inventory system had been in use for at least six months in
all nine prisons that we reviewed and it includes many useful tools such as drug interaction
detection, readily accessible medication profiles, and
medication utilization data. However, most pharmacy staff
“The computer inventory is
told inspectors that the new computer inventory system was
not a useful tool for us.”
not accurate and could not be trusted. While visiting one
— Lead Pharmacist
pharmacy, an inspector took a bottle of medication from a
shelf and asked the pharmacist if anyone would notice if he
removed the bottle. The pharmacist replied, “Probably not.” Pharmacy staff at three additional
institutions gave similar answers.
In order to test the accuracy of the computer inventory system, we selected 14 medications from
the most expensive stocked in prison pharmacies, and compared the physical inventory to the
1
computer inventory at the nine prisons reviewed. The following chart illustrates the differences
between the computer inventory and the actual stock on hand of these 14 medications at all nine
prisons. The most significant disparity was in Risperidone 3mg., of which inspectors counted
5,191 actual tablets while the computer inventory indicated a stock of 24,360 tablets. This is a
difference of 470 percent. The discrepancy between the computer inventory and the physical
inventory of these medications demonstrates the unreliability of this system.
1 Narcotics are maintained in a separate, controlled environment and are not included in this data.
Bureau of Criminal Investigations, Office of the Inspector General

Page 20

Figure 4a: Comparison of computer inventory of 14 selected medications with the actual stock on hand
at the nine prisons reviewed.
Source: Office of the Inspector General
Drug Name & Dosage

Abilify 10mg 4,724 Physical Inventory

Abilify 20mg 4,842

Abilify 30mg 4,483

Depakote ER 250mg 5,052

Depakote ER 500mg 14,634

Effexor XR 75mg 6,292

Effexor XR 150mg 4,663

Geodon 40mg 5,570

Geodon 60mg 4,473

Geodon 80mg 6,423

Risperidone 2mg 6,440

Risperidone 3mg 5,191

Zyprexa 10mg
3,911

Zyprexa 20mg 3,131

12,299

Computer Inventory

11,998
13,770
15,933
18,242
16,259
18,215
13,476
15,051
15,007
14,285
24,360
13,827
10,745

At $0.58 per unit, the difference between the cost of the actual stock of Risperidone 3mg. and
the cost of the computer inventory for that medication is more than $11,000. As Figure 4b
demonstrates, the cost difference between the computer inventory of the selected medications
and the actual stock on hand at these nine prisons alone comes to more than a million dollars.
When we inquired about the inventory disparity, pharmacy staff provided several explanations,
including:
• Medications are added to the computer inventory when ordered instead of when they are
received.
• If, for some reason, stocked medications are returned to the supplier, they are not
consistently removed from the computer inventory.
State of California • April 2010

Page 21

Figure 4b: Cost comparison of computer inventory with physical inventory for 14 drugs.
Source: Office of the Inspector General

Drug Name & Dosage
Abilify 10mg
Abilify 20mg
Abilify 30mg

Actual
Total
4,724
4,842
4,483

Total
Computer
12,299
11,998
13,770

Depakote ER 250mg
Depakote ER 500mg

5,052
14,634

15,933
18,242

Effexor XR 75mg
Effexor XR 150mg

6,292
4,663

Geodon 40mg
Geodon 60mg
Geodon 80mg

Cost
Per Unit
$12.60
$17.81
$17.81

Total Cost
Differential
$95,445.00
$127,448.36
$165,401.47

10,881
3,608

$1.76
$3.23

$19,150.56
$11,653.84

16,259
18,215

9,967
13,552

$1.75
$4.49

$17,442.25
$60,848.48

5,570
4,473
6,423

13,476
15,051
15,007

7,906
10,578
8,584

$5.93
$7.19
$7.19

$46,882.58
$76,055.82
$61,718.96

Risperidone 2mg
Risperidone 3mg

6,440
5,191

14,285
24,360

7,845
19,169

$0.52
$0.58

$4,079.40
$11,118.02

Zyprexa 10mg
Zyprexa 20mg

3,911
3,131

13,827
10,745

9,916
7,614

$12.40
$24.80

$122,958.40
$188,827.20

Total
Difference
7,575
7,156
9,287

Total for 9 institutions: $1,009,030.34

• Medications dispensed through a prison hospital are not automatically removed from the
computer inventory.
In addition to the explanations provided by pharmacy staff, we observed instances in which
staff practices contributed to the inventory discrepancies:
• In one pharmacy, we found medications that had been returned from prison yards
were scanned back into the computer inventory and then discarded, thereby creating
inaccuracies.
• In another pharmacy, we found that staff were returning medications to stock without
scanning them back into the inventory.
Inventory counts are of no value

We were informed that a physical count of each pharmacy’s inventory is taken once a year
by an outside vendor; however, pharmacy staff explained that this yearly inventory is not a
meaningful tool because the computer inventory system is not reconciled to the stock on hand.
In an effort to perform a timelier inventory check in addition to the yearly inventory,
Maxor implemented routine cycle counts, an inventory control procedure in which selected
medications are periodically inventoried. Cycle counts can only be done when no orders are
pending, which means they must be performed before or after the day’s work. Some pharmacy
staff said that it is not feasible to conduct cycle counts because the high volume of prescriptions
they process daily does not leave them enough time to complete this task. One pharmacist
Bureau of Criminal Investigations, Office of the Inspector General

Page 22

commented that Maxor had requested cycle counts but had never followed up, so staff did not
conduct them. Another pharmacist explained that his staff had originally performed the cycle
counts, hoping to correct their inaccurate computer inventory; the inventory problem persisted,
however, so they stopped doing the cycle counts.
Ultimately, we question the value of the yearly physical counts and the cycle counts, since
pharmacy staff are merely adjusting the electronic inventory to match the physical inventory
without determining the causal factors for the disparity.
Automated features “auto-refill” and “auto-reorder” require manual correction

The failure to maintain an accurate computerized pharmacy inventory has also resulted in
additional staff workload. Pharmacy staff explained that the computer inventory is tied to
the daily “auto-refill” component of the dispensing system, an automated function which fills
an individual’s ongoing prescriptions, such as blood pressure medication. These ongoing or
maintenance medications are filled for 30 days at a time. Each pharmacy refills hundreds of
these orders daily.
Because the computer inventory is not accurate, the auto-refill’s functioning impedes the
pharmacy staff, who manually override the computer system in order to accomplish their tasks.
For example, the computer system will only allow prescriptions
“The issue is the inventory
to be filled if the computer inventory shows that there is stock
control problem. Auto-refill
available to fill the prescriptions. If the computer inventory
shows less than is needed, the computer program will not allow cannot work with inventory
as it is.”
the prescription to be filled, even if there is actually a sufficient
stock on hand. Pharmacy staff must then manually override
— Lead Pharmacist
the system to fill each of the prescriptions, or manually change
the computer inventory to show a sufficient quantity to fill the
prescriptions. Inspectors noted that this manual adjustment of the computer inventory also
contributes to the disparity between the electronic inventory and the physical inventory.
The computer system also includes an “auto-reorder” component, which, in theory, should
track dispensed medications and create orders to replace those medications in the pharmacy
inventory. In reality, however, an inaccurate computer inventory system also results in the need
for pharmacy staff to manually track the dispensed medications so that they can order new stock.
“We used the auto-reorder
at first because Maxor
insisted, but we got so much
stuff we didn’t need that it
would be dysfunctional to
trust the system.”
— Lead Pharmacist

State of California • April 2010

Pharmacy staff described instances in which they had allowed
the system to automatically place their medication reorder, only
to receive unneeded items and/or excessive quantities. One staff
member estimated that 70 percent of the items suggested by the
auto-reorder function were not needed. For example, when staff
allowed the auto-reorder system to place an order at one men’s
prison, they received birth control pills; pharmacy staff who
used the auto-reorder function at another men’s prison noted that
they received a shipment of vaginal estrogen tablets.

Page 23

Rather than relying on the automated system, pharmacy staff members keep a daily list, which
they use to place reorders. In one pharmacy, inspectors observed a cardboard box with empty
medication containers in it. Pharmacy staff told inspectors that the empty containers are placed
in the box and later used to place an order at the end of the day. Because staff is unable to rely
on the computer inventory system, they estimated that it took between thirty minutes to three
hours of additional work daily to prepare the reorder to replenish their medications inventory.

Bureau of Criminal Investigations, Office of the Inspector General

Page 24

Finding 4
Inconsistent practices in handling medications for inmates who
transfer between prisons result in waste and increased costs.
CDCR transfers approximately 156,000 inmates a year among its various prisons throughout
the state. Over 100,000 of those inmates are taking prescribed medications. Since each of the
100,000 inmates receives an average of five and a half prescriptions, the amount of medication
involved in the transfer process is enormous. While the Receiver has the ultimate jurisdiction
to ensure that inmates have access to their medications in an efficient and economic manner, a
coordinated effort among medical, pharmaceutical, and custody staff at both the sending and
receiving institutions is necessary to minimize waste and ensure that there is no interruption to
an inmate’s drug therapy. As a result of the numerous staff involved in the process, our review
into this area focused on six prisons.
We found that four of the six prisons over-dispense medications when they transfer inmates
to another institution. We also found that a high percentage of inmates arrive at the receiving
prison without their prescribed medications. And we discovered that once inmates arrive at the
receiving prison, all of their medications are refilled, regardless of the amount of medication
sent from the previous prison. All extra medications are returned to the receiving prison
pharmacy, where it is highly unlikely they are restocked.
Photo 8: Incoming inmate transfer medication.
Source: Office of the Inspector General.

State of California • April 2010

Page 25

Our findings are similar to those referred to in the 2005 court decision to appoint a Receiver,
in which the court found that prescriptions were not consistently transferred with the inmates,
resulting in large quantities of medication being discarded, and that the receiving prisons
routinely disregarded prescriptions from the sending prisons.
Some pharmacies dispense more medication than is required for transfer

To ensure the continuity of medical treatment when an inmate is transferred to another
institution, the prison’s staff is required to ensure that a minimum three-day supply of all
currently prescribed and essential medications is sent along with the inmate. When an inmate’s
remaining supply is less than the prescribed dosage for three days, the nursing staff notifies the
pharmacy, which dispenses the additional dosages.
If an inmate’s prescription was recently filled, there may be several days or weeks’ worth
of dosages already dispensed and available to be sent with the inmate. However, we found
that pharmacies at four of the six prisons we visited dispense at least a three-day supply of
each inmate’s prescribed medications, regardless of the number of dosages already available.
A nurse at one institution said she routinely orders a three-day supply of medication to be
sent with each inmate transferring as a safety precaution. One lead pharmacist’s reason for
preparing a three-day supply of an inmate’s current medications is that he cannot be sure the
remaining medications will be transferred.
The fifth prison’s pharmacy staff explained that they only fill a three-day supply if the
inmate’s medication record shows that less than five days’ doses remain, based on the date
the medication was last dispensed. The sixth prison’s pharmacy staff said that about one year
ago, they stopped their practice of routinely filling a three-day supply for all inmates who
were scheduled to transfer. Instead of relying on an inmate’s medication record, pharmacy
staff at that prison rely on the nurses assigned to the transfer unit to advise them if an inmate
has less than three days’ worth of medication on hand. This pharmacy has not filled a transfer
order of medications in over a year because the nurses have not indicated a need for transfer
medications. However, data from one receiving prison shows that in one month, over half of
the inmates sent from this prison did not arrive with their required medications.
Inconsistent practices result in some inmates arriving without their prescribed medications

Some inmates do not arrive with their prescribed medications, even though medical staff at
the transferring prison are supposed to pick up all medication from the inmate’s housing unit
clinic, prior to the inmate’s departure, and transfer the medication. Inmates in possession of
self-administered medications are supposed to give their medications to staff. The medications
are then packaged with the inmates’ medical records and taken by transportation officers to the
receiving prison. We spoke with some of the nurses screening new arrivals and learned the
following:
• One prison reported that of the total of 49 inmates arriving from other institutions in a
week, only half came with their required medications.

Bureau of Criminal Investigations, Office of the Inspector General

Page 26

• At another prison, a review of inmates who arrived in a one week period showed that about
a third arrived without their medication.
• A nurse at a third prison reported that out of 20 inmates who arrived on one day, 15 had
at least one prescription for medication, yet almost half of the 15 arrived without their
medication.
Upon arrival, inmates are prescribed additional medications whether they need them or not

When inmates arrive with a supply of medications, those medications are not used up before
a new prescription for the same medication is reordered by the medical staff at the receiving
prison. At five of the prisons we visited, we were told that when inmates arrive with a
supply of medication, that medication is sent to the housing units’ clinics, where it will be
administered only until a new refill is dispensed from the pharmacy, which is usually the same
day or the next day. The unused medication is returned to the pharmacy, but it can only be restocked under very specific conditions. The sixth prison’s lead pharmacist explained that their
general practice is that only medications filled from their own pharmacy are sent to the housing
units and that any medication coming from other prisons is destroyed.
For inmates with self-administered medications, such as inhalers, new refills are also dispensed
shortly after arrival. Pharmacy staff showed inspectors a bag full of inhalers found in the
possession of one inmate.
Photo 9: Overdispensed inmate medication.
The inmate had been
The inhalers shown have an approximate value of $1200
transferred between prisons
Source: Office of the Inspector General.
and had several unused
inhalers he received from
at least two prisons. The
pharmacist stated that one
inhaler was dispensed upon
arrival at the receiving
prison, which was two
days after the inmate had
last received one from the
sending prison.

State of California • April 2010

Page 27

Recommendations
To address the deficiencies identified in this report, the California Prison Health Care
Receivership Corporation should take the following actions:
Medication Restocking

Formulary Adherence

Inventory control

Inmate transfers

Bureau of Criminal Investigations, Office of the Inspector General

Page 28

California Prison Healthcare Receiver’s response to
the special report (page 1 of 8)
J . Clark Kelso. Receiver

STATE OF CALI FORNIA
PRISON HEALTH CARE SERVICES

<;
)

April 7.2010

Mr. David R. Shaw
Inspector General
Office of In peelor General
P.O. OON 348780
,cramenlo. CA 95834-8780
Re:

Response to O1G pedal Report - Lost Opportunities for B,·ings within California

~ L ,~tn'::' Pharmacies
De~.'Mlaw:

We have re" iewed tbe Office of the Inspeclor General draft report on California Prison
\\'bi le \\e welcome nnd concur that there ruc opponunities for funher
improvements in our phnrmacy operalion~ tremendous invesunenl and eITons ha\'e been
undenaken 3S described in our enclosed response.

Pharmacies.

Again. we would like to thank you and your S13n~ for the \'alunblc review and recommendations,

ineerely.

Receiver
Enclosure

cc:

Honorable Thelton E. Henderson
Elaine Bush. Chief Depul)' Receiver. PII S
Bonnie 'oble. Director, Allied Ile.lth ervices. CPHCS
Wayne Goh l and Eugenc Roth. Chicf(A). Pharmacy Services. CPIIC
Brenda Epperly· Ems. Director. Policy. I'lanning and E,aluation. CPHC
Johnn) Hui. Cbief. Inlern.1 Audi t, CPI ICS

P.O Box 4038 . Sacramento, CA 95812-4038

State of California • April 2010

Page 29

California Prison Healthcare Receiver’s response to
the special report (page 2 of 8)

R C$po nst t o
OIG Audit
SPECIAL REPORT
LOSTOPPORTIJNITIES FOR SAVINGS \VJ TIHN
CALIFORNIA PRISO PfiARMACIES

As demonstrated in the history presented in the repon. !'tfoM of the COCR pharmacy program has reprtstnted a
significant challenge. Transforming the sY$lem from one consisting of 33 separate and poorly perfonning phamlacy
opcral~s.
each of l,Jo·hich operated
The following provides highlights of our rC$ponsc lind recent
independently from one ahOltK.-r. to an
achicyemenlS occompJi5hed for the pharmacy operation:
effective c-cntralty eoon:linated pharmacy
PharmIlCeutiC'.1 Cosu
prognm has required sigllificam lime.
CDCR dNg expenditures were increasing at double-digit rotd.
reSQuI'CC$ and efTon " nd remains II work in
Since implemrntins our progrnm impr-O\'eIT1cnl, ph:mnllCf
progress, A s a pan of the Tumillound Plan
e~lX"ndituft:5 have increased 2% or less each year. which i! 41
put in p~ by the Receivership, 8
frac:lion of the nationallrend of 6-7%.
progrtss ion of carefully planned Steps an:
This chllJlge is even more signiftC~' when one considers Ihm
heln& laken to put in place " ccntrally
man)' of the related medical eart improvement initiatives being
adm inis tered, standardi7..ed 3pprooch to the
im plemented eonc:umluty hll~·Ci increased the numbers of inmatedeli\'el')' of phannxy sel"\'iees thM is already
pat ients being treated and Ihe level of lecess to care,
resu lting in a more responsive lind costeffective pc-ogram. Wh ile there rtmains
M«Iicalion MIOIll&l:'lIlrnt
much work to IIchicve these goal.$.
•
S20,3 million in COSt avoidancc ttehicved in 2009 due 10
sj,nificant progress has b«n made.
fonnulary management and UlrgcteO drug contracting efforts.
This document rt:Pf"Cscms the California
•
80% of the prescription drugs are filled u.$ing gen~rie
medic~l1 ions .
Prison Hea lth Care Strvices (CI' ..ICS)
Receiver's response to the final droft of the
S2,6 million per year in decre.ased U$C of non-formulary drugs
"S~cial Report:
Lo5.1 Opportunities for
(S19.76 per inmlue in 2007 toS 18.38 in 2009),
Savings
\\ ithin
Ca li fornia
Prison
Phtum"cies" reeeived o n March 30, 20 10
Rtfurn 10 Stotk and WIJtC'
from the Office
the Inspector General
•
S I} million in Return-to-Stock savinp \!tIC projecU:d for this
(010). The following pages provide a
fiscal year.
summary rtsponst to the key findings and
•
$4.7 million in cmJil for retumed drugs have b«n recorded .since
rec:ommencbtions noted in the report
2007 .
prepared by the OIG ~gard in, the COCR
prison ph.nnnacy program.
Addition al benefiu with CC'nlr-a1 ri ll Pharmacy
Standardittd bar code labeling and automation willllilow for

efficient and Itcc.ounlilble reclll.l1lBtion.
ignifleant inventory bcrK'lilS by sh ifting most oflhe prescription
p~si ng to a central faci lity wi lh etonomle! of scale and
eentralized. automated controls.

Bureau of Criminal Investigations, Office of the Inspector General

Page 30

California Prison Healthcare Receiver’s response to
the special report (page 3 of 8)

PhI m Ule,

C~1t

W hite- phunnaty ca:rl:!i hJl\'~ ris~n slightly
mcr thr lasl Ihrf't' yttn. the rll tt or rist 15
dramatitall) IOVlc-r Ib1ln t hat eJpu irncrd
p rlol'" to the Rttthtnhlp'5 e(roru to rerorm
thc phll r ma~' prognln.. EfTons 10 comrol
the cost.s Dr phllJ111l1cy I:;IUe hll,t resulted in 0.
sianifN:ant fo\\ mn; or the annual i ncn=~
seen in prior )ean. These efforts. ~ b) an
IIcthcly ~ngagro PhannKY 3nd '1"her3peuli
Commitlet'. M \ t inclw;led such act ions 3...'>
requiring the use of generic meditru ions
"htnever pcmlble. actively fTWlBging the
formulary.
emp~) ing
taf'l~ed
ctrug
contlDCting 5trDl~ie.s. uliliLing lhtn1pc.utic
InierdmniC$, de\'elopin& dise3!C guiddines
and opcimizing dO$inS in moo,ication

Pl'fmrn lna.ma lll Dn.l1 EJIP*nOitu,..
fromPrwl/t.ow; t.llancbrY...
C~~redUlH4ItIOMI ~fI(l\lNI'''·

nih

· alCl ..... _

• _ __

.to . .

....
.~

,,.

-.-

..... _MIII'

*'__

_ __

thernpies. A.s illustrated in the odjaccn\ man.
=:::-.=.===-too;.--~------ ~!
the ~rcmmse increll.~ In drug expenditures
fn 2009 (2.~.) is " ell belo" (he 23.4% and
13..2°. increasc:;: $Cen in 2006 and 2001 respttti\'ely. In addition. in comparing bmchrmut projcclif;tns., Lhe increase
aboul ia tJurd of thaI (,Xpc'Cled n_tionall) .
.
- .'

"'~

Thff cJJang~ iJ n'M mOre slgmflconl whf'n ~ cOn!dd~f3 thal ,"(1'/1)' oflhc n:./uled ntt.dietJ/ curt' Jmpro'"l!mr.m 'nJ1Jnti"~
belflg lmp(ememed roncurrcntl)" I,O\'~ I"creased 'hr lIumbu$ of inmalc-palu'nlS being Irt:utitd (V'fd ,hr Icvtl o/O«eSJ I()
caN, For namplt. the Chltl.'Ilml follow lIIusU'~te: Ihe I~d casu expoienced in HIV and Hcp:uiLis C ml:dl~tionj
r'Hptclivtl} resulting primarily from inc:~sed lCCess 10 tl'eO!tmenl for thcse condilion$.. By the end 0(1009. COCR " 35
5pCnding almo:;;1 double IhI! Ilmount or moncy each month rar IIiV medicmJotu than In 2006 before: the ~ronn cffom
began. Over thai same time comparison. tlepatitis C medication spending hilS incnased almost eiQht(old. In dollM
tc:r~ COCR ~pcnt SII.l million mo~ in 2009 than ID 2008
HCV rnedlcallon5 Md S3.1 million mort for HIV

rot

medicatlonJ.

........
'1__
' 1 tOOOCIO
I .......
.UQIiIOQO
"00Cl0Cl)

......

~;I

.ooOClO

...,

a.~QOO

....

_--.c'HI

' I~OI»

- - -_ _ _ _ _ __ _ _ _ _ _ __

//'///,//,l//,f.//.///
Ongoing program savings h.1\c also betn dWKlrlstnt.ttd due to di~ a li,iti relAled to fonnuhll') management Mel
tttrgl!Lcd druB coolllctms,.. Through the P&!T committ~. certain drugs arc: tl!r.a.etcd (or ~p«ific purehaS(' agrc:ements .bat
PfO,,;ck additior)31 dl5Counts in price through prtftrrtd rormulary !taluS;. These elTons resulted in S20,l mUlion in co!ot
Ilvo'dance in :2009 alont, This $iunC inililaLI"e yielded II roSt lS"oidAnce 0($16.4 million 1n 2008
Faellit\ Pha rnlflC'\ OHrdg hl

To add ress luue:s r..latlng 10 the ovt Nlgh' 0' 'ltellll) I~' el pharma<'-y opuulon!l. the R.tcth'er·" orne''" look Itpt
In De('ember 2009 10 titftbll~h • ('lear line o( aU1horhy (or ph.rnUlC)' optriliionJ ¥I lIh Iht I.lppolnl melu 0' Iht
Chltr or Phunulc)' ( ). Thi SI8te employee has direel line and disciplilW')' lIIuthoril), O\ C1' the pharmlllcies Ind Is
charged "ilh enforumenl afsuut'" ide pharm~)' policies lind pracliccs. Regular oCommunit.Mions. ineludmg month ly

State of California • April 2010

Page 31

California Prison Healthcare Receiver’s response to
the special report (page 4 of 8)

meetings of 1511 Pharmacist.s· ln--Charge at eo.c-h rucility fIl'e being conducted (0 review and reinfon:e polidC$ and
np«lalion$..
Rtd u£ing M edication \V_sid Retu rn 10 t oc k
Thf rfducdon or m~d k;IIID n waslt' hRJ btrn a mK ltr,. of (n1i:oin& allt titiOIJ IhroughoUf Ihe phumac)
Imp ro\,tmtnl InlllJu h'e. pro\'ldlng ror I.h ~ n~1 Hm. a ml!"ans of accouD l ill~ for Ihe JUIl Oli ntS I"tlurned . nd w!)sud.
Tb i.l fi«:al )ea,., mort' Ibu n S IJ mll l,lon In rtlum IO ~I ~k Is projteled.

†



Anced idcnti(.rd early on "'1l$ tht' lac-k of a function.,l rerum! contracL Sub5equrntly, Ii conln1ct ",<as ntgtllliltt'd and
approved b) lbe Receiver \\ itb Guamnu:ed rlrtum$ to pro.... ide a ~~ for \l;h~h medications lh::n could not be
reclaimed CQuid be legal I)' retumed 'And credll otKained ~hc!n ~~ible. S.inct the COfIlrnC:t ",-as inllialed in 2007. re1"Ums
credit ofapproxlmlltdy SoI.7 million hits been rewrded.
Subsequent 10 that effQr1. 35 a part or the
GUllrdiilnflx pharmlc), operallng 5)Slem
implementation. a Rt1:um'IOo lock CRT)
function \\lIS dc:"elopcd 10 provide rQr the fil"$l
tlm~ .. mtChilni!m 10 xcounl for and 1rack the
rc:clamntion of medical,ion "ithin the system.
Evidence of Jucb efforu can be found b)
c'I(smining IhC! cha.n to the right which
documenls lhe ina'Cluin, (np,;.emmt in IhC!
RTS proctu by COCR facillli.es. Troc*mg if
Ihu Lu-ue ,"'as first mllltl/~d ;n ScptemlNr 1008.
,"'lIh lbefir.fl month Teportlrlfl. abo!" 5Joo.000 in
R1S By F,,"ruQl)· 1010. Ihe RTS amOltni.f htn'e
more than qlloJnpftd t () (llmOSI 51.J hlilllon
pu mOO/it.

,..-

-•

/'////////'///////

In jusllhe first eight months ofthiJ FY. IIcnml
RT amounts Ilre: on'r S7.8 milliQn_ We project that Ibc \1llue elf RTS alplUJ"td in the c:umnt fi5Cal )car will be over
SI3 million.
Thr: n-pon $usge$ts that the p1"6toce and discus.sKm$ by the OIG mspectot'S ""jlh three prisons resultcd in an immedillll!
inaease in their RTS I'nults.. While not denyinll hllt the 010 discus$ians rna) ha\c had an implKt on the far:ilillc5. 10
53)' their presence \\as chI: dirttt rtaSOn for lhe incR!ase ignores the f8(1 thai othcr racililies. nol visited b)' Ihe 010 ll iso
reflected Incrc:ase$ in RTS throughout the l;i$t 18 montbs since trocking of these actiyilieJ btgan In fact, during
September 2009. (the montb refe.rcnctd in tbe report) the 0\('1'1;11 amount or RTS recorded incrcll$t:d b) S344.000. only
about a third or "hleh i$ 3ccountt'd ror b) the Ihre~ facilities nllmtci. The report "Iso odmowledges thoU higher
re510d.ing rale flK:ili lles ho\e b«n more: sutcmtUl by t'mpIQ)'ina; the vCI)' st.ralcs,iC$ tblll tune been pan or our ongoing
training tnOns: incorpor:uing 1he restodr..ing dudes into !he reJ"lar workday rouli(1C$ i.1Ind UJini unit dose medication$
when a\"l.IIa.blc. l'be process oruunsrerring such "best prncticcs" from one facili1,. to 'the others is an ongoing part Qf
die overnll \\ork iR\'ol"cd in lbc R~ivers.hip· s etTort to improve pharrnllcy opt"rMion.
''''hile the Retum·co-S«Ic:k process contin ue~ to sOO\\ impro\'emenl ond will be- a point of conlinucd emphasis.. it is a.1so
imponnnt 10 lld:no\\ledg,e other R~eher iniliathes !limed Itt reducing the need for f1tdlhle~ to usc the return 10 stoc::k
processes. There Are twO primal')' inilillli\' e~ of the Recei\·er's pharmacy impt()\Cmenl effortS 1M! will have substantiAl
near term and lon,·term impacu on redudn, waste. These mo projects arc the t:Stablishmc.nl of II Central Fill
Pharm3c), (near-rerm) and the de\ c lopmenl oran eMAR or c lectronic l00diclllion adminiSlnnion record (Io n &er~tcmn).
The Central .. ill Pharmacy (erp) proj«t cnt:ails 1M construction and cquippin~ of 4 ((rHI'lIIud prescription packaging
and automated disuibution system. The automllted centnllized phannac)' is designed 10 gain OOVAntages of scale rehilled
10 efficient pu!chasinc. imentOty control. volume: production. drug distribution. '¥>orkforcc- uulizalion. IlJ1d inr;retued
pallen! safety. To achieve lhest advantages, Ihe new centralized phannacy building will Il~sume lhe- majority of lhe
d.rug distribution fWKltons for 111 COCR filc:ili tie~. "ilh the e,,«priem of immediate netds fill. and suc:b items AS
medk.uions requirina rdri,ennion and inlTB"etlOUll $OIUlions. The CF'P"iII order bulk pharnJQc~utirol." 10 be ckln'ua)

† Circled numbers correspond to OIG’s response (beginning on page 37) to CDCR’s response text.
Bureau of Criminal Investigations, Office of the Inspector General

Page 32

California Prison Healthcare Receiver’s response to
the special report (page 5 of 8)

to the CFP thereb), como/luming drug purcJraJing. decrclUlng .t)';Jt~m·",ldt ;m'rntory emd the current need to mamlam
dlq»icalil'e i~nttH'ies at each/aeility. CFP automation wil l bc= used 10 package bulk pharmaceuticals intO 30-day dMt'
blister packs: fulfi ll pre:seriplicm and $tock or-cIer-$ for.all COCR coJ1"eCliontal ftteilit icl: label medic.uions IS required 10
mcc=1 $ble and fe<kr.tI p~scrip l ion rtquirements; provide bar--(;od~ validalion matchins thc= drug 100 the speci fIc.
pre$criplion; ..nd too $Ort the completed oorders foor shipping and nexl-da)' deliver)' 100 Ihe facilities. By u.tlng the CFP
pr~pare.d blisler pacu for me.dication. Ihe am'antages ciwJ in Ihe r~porllor unil don: packaging will be adrit:'HQ for
01/ the dru~ (tNand and generic) that au ;~ued. ' tock al the facilities for immc=diate needs fill will also be p.acka,ged
in this manner and provided by the CFP. The Central Fill Pharmacy will also be equipped with automalion 100 50rt and
r« la im returned meditations eligible foor reuse. IlUtf!ad oj' having f!ac:h facility T(u:Jaim mf!uicatiOm. the ",tdlcations
will be returned to 1M CFP ....here Ihe staMara;:ea bar code la~lins ana automation wiJI alit»!, lor ~fficif!.nI and
(I(XOuntabfe redOMCJtlon. The CFP is scheduled 10 begin operation in May 20 10 and will be deployed to all facililiu
oo\'er the substquent 18 moonth period. Equipment inslnllation:and tnllining of stuff ~&ins in April 2010, follc.we d by

fi nal $)'5tC:m u:·sl ing ilnd i.nitial stock preparation activities in Ma)'. Beginning in June and July. respective I),. IWO
facili tics \Viii be implemented as lest silts tOO valid31e the implemtnuuion prOCeSSd. ilc:giMing in Aus-wl 2010. IwO
additicmal faci lities will be added 10 the CfP c:a<:h month until all facilities hav~ been converted.
A long~r t~rm $Olution i$ lhe impJnnenlation oof an Eleclronic Medi~1ioon AdminiSU'l11 ion R«ord too nMsform Ihe
medicalion administr.nion process and provide importanl bene-fits thou improve palient cate, incrC'l-5e .accounlabilily and
re-sult in ra more COSI clTcclive medication admini:ilmtion prOCe$.$. Thc:$C bcnefil$ repre$Cnl $ign ifieanl improvements in
access 100 ean: ..nd a decrease in Itle amount oof heakh care and eoorreclions sta ff lime required to ensure thai the right
medication is administered to the ri&hl patient, in lhc ric.hl dosage, ill the right time . funhe r, lin eMAR assure$
continuity of care by making p'lIiem profiles ava ilable at any medicalioon administration area slatewide. 1M S}oslern
would redflce WUlle and aduu~ mmaJe-patienJ mO~'~me'n1 by raing Jlanaard bar rod~d blisler card$ f()l' stock
me.dicmioos. rather tha" palilml-specijic earth.. Th~ medication profil~$ would be a v aila bl~ fQf any paticnl at any
authoorized cMAR I~rmina l. Thc= palic=nt pr-es~nts 3nd hisiheT $C'hedu lcd medic:;,.ions are displ .. yed :md can be
immediately .dmini5lercd via a 5tock card. The in "enIOOry oof the medicllIlicm is d«rcmenled and the medk.alion
ttctminislnuioon is recorded. The eMAR inilhnivc: wil l require 3n cXIC'nsi,'c effort and mus,1 be coordinat-c=d with other
loong-term infrastructur~ and infonnation technOloogy proje(ts underway within the Recei\' ~tship. AI Ihis time.
dc:velopmeflC or tbe eMAR system is anticipated 10 begin in aboul 24 m()nths..
No n~ f9rm ulary Mrdkaltoll Approval ProctS!I
Mlln.J:tmCnl of bolh formulary a nd non-form ul ary el)j"l.tI Is an ongoing drort Il'd by Ihe COCR Ph a rnulCY li nd
Therapeutic5 (P&l) Committee a nd clinical 'udership, The formu lae)' ml nlllgC'n1cn l proc:cs.sa: pUI in pl*CC"
tbrou5th thc R~<:tinr·s erforlS arC" designed 10 push pre:serlblng Cow.rds Ihe most cos(.C!((«th'e mediC-ilion),
Undc=r curnnl policie$., drugs are purthased in their generic fonn when ayailable and aUlomlllk.ally sub~iluted for Ihe
COfTC$ponding mnd name producl. In CDCR. 8~ 0/ the pr~scriptl()n dru&1 ~ flNed using gentrfc rnedicallCIU.
Prescribers may noc uSC' propridy product when" generic equiVlJent i$ 3"OIilable unless a non4formulary request is
approved by Iheir superioor. Some med ications rare- also placed on n()n-formulary $tntus too force a scwnd-levC"1 re:viC"w or
their use because ofsuc.h factors as thcir high C05I or their risk profile . It is imponant to uncle-rMand thlSt plKement of a
drug on non-formulary SllIIU$ does nOOl mean the medication is nOOI me-dically nccC!'SS3ry, but ruther thlu a more careful
I'C.'view of it$ U$e 1$ indicaled.

When examining non-fonnulary c05l5, it is important 10 recognize thlll such eoslS conslrantly change ill the P&T
Committee adds and deletes iterJU (rom the formulary each mcmlb. These: decisions, which nonnally take about 90 da)"s
to be implemented. r~,ul arly shift COSIS belween the: form ullll)' and non -formuWy categories. For example, during the
months ciled in the report, the P&T Coommitt~ converted from effexor XR to the newly ayailable gen~ric ER (orm oof
the dru: . The spmdin, (shin to F) for Effex oor XR was S366,483 for the .six months from July-Dc:c:c-moo of 2009.
This one example OCcoounLS for about SO.38 ~r inmale per month oflhe non· fOrmul ary COSls over this time period. As
the shift 10 me g~neric: ER is fully realized. the eosts for the EffCJ(or XR version thai were shifted froom the fon1'lulary 10
non-formulary will &0 doo\'>n ,

Additionally. an examinatioon ornon-(ormulary CO$IS $hould also aecounl for llr'Iy ooutlier situalion$ thai can impact the
COOSt For example. during the period from Jul)'*Ot"ctmber 2009, one SUlc prison hlKi a pOllient rcquirin, a highly
expensive antihemophilic factor medication resulting in an unan1icip:aIC<l S1.31O.194 in costs, ull non· formulary , These
COSlS contributC"d signifICantly too the higher non· formulary (;()$t$ foor this period.

State of California • April 2010

Page 33

California Prison Healthcare Receiver’s response to
the special report (page 6 of 8)



The repon cites a eakulation of S19,85 per inmzlle per month in non-rormulary C05l:50 for a three-month pcrioc:l in 2009
for 24 priwnl and rOm partS !.hose COSts 10 lh~ $)'st~m wide dala (for all 33 prisons) for 2001 and 2008. The system
wide da13 is tracked Nsed on acrual purchases and reponed monthly to the PkT Committee, Th:lt ootfi s ho"'5lhllt th~
system wide CoSI per inmate pet mo nth for- n(tn-formulary med ications in 2009 was actually SI8,38. A ,llTee )'t(lr
c()mpal'iS(m for all JJ !acilitiU SM'W:t non-/()rMulal)' com /xen I'edugdjrom an m'erag~ of S19. 76 in 1007 10 SI8 38
in 1009. withaMI oJiustmg!or ;""alion. r~pr~tnling mflre ,hen 51,6 m;tIi()ft in UN ngs per yt(U'".

CPHCS le3det$hip h3$.. ov~r th~ lasl y~ar bcm actively cngagro in K'o·~r.ll ~ffort5 10 improve medication utilization, In
recent months, (he: c linical Icadership (earn has idcn(if;ed and di5lribl.ll~d a Medication UrlCiency mid Quality
Improvement (MEQI) initiative that has targeted several goals related to medic.Hion utilization including. reduction in
non-formulary medications 10 thrtt perccnt or le$.$ o(totnl pf"C$(:riptions. Inilial re~lJll~ oflh~J~ 4/oru ar~ promi:s;ng. In
January and February of 1010. non-/ormMltITy CMls ptr inmate P'" month (n'eraglNi S16,01, slgnlficomly lo~er 'han
the 518.38 (n'erage!ol'Z0Q9.
CPHCS dinicalleadership has also been acth'ely examining the use of o'o'er the.c:ounte1' (OTe) medical ions and has
im p lem~nted II Slntt~gy to reduce Ih~ usc of non-modically necessary i t~ms. An initiatiyc ,,'M launched in February
2010 thai will remO\'e «I'lain
pr()(iIJCI$ from the formulary that hsv~ been dt:t~nninC'd 10 bot: non·medically
f\oC(cssa.I')'. Exa.mplH or ilems Ihat have been discontinued include fi$h oil, gIUCOS;Jm ine, mU$C1c rub, cert:lin vilamins
ite/t15 hm'e iH!f!n matlftd 10 a non-formulary ~'alru requ iring Ihe prescribing provider 10
and vapor rub. Olhu
documenl the medicl;ll need fOlthe items., including IOCions, digntive a id (Lact:lid) :lnd diphcMydrnmint:: (Benmdryl).
4

ore

Ph . tm.tv Inventl) ry M.n.gement
The cffe-ct in manBKemenl of pha,.macy Inn niory n :q uircs a n integra tcd set of s t,.s legits and is II work in
prog r~$. The th ree primary $Inllegles ad opled by t he Rpce i'o'ership In'o'ol\le the de ployme nt o f t he C uard la nR x
pha r m acy I)'Jle m; t he im ple nlenta Uo n o( a c-e nt r a liud ph . rm ~u:y. l ilt! the de\'elo p1ue nt o f a n e;'oo1,1\R .sY:50lem.
Thne three componcnts pro\'ide a (ounda'ion ror a comprehensive invenlory manalem<"nl process, As th~$C :nn,caie.s
are implemented, a1SOCiated improvements in invtntory management will be gained.



The GuardianRx pharmacy operating .system provides for the fi~t (ime. a numbtf of (ools (or the pharmacies '0 use 10
manage their work_ The system include.s :I comprehensivc $CI o( loots for managing im'cnlories and th~ ordering
process.. Addition.lly, unlike the prior ineffective data S)SlemS, the GuardianRx s)'ltem ensures compliance with
established leg.;l l and regula10ry requirements and muintain.s data needed to manage the work effcctiYely. The
chtm&eov~'t to this system hIlS ("nmi led e:l(lc(t5ive training, lind chan,gcs 10 pre:--c=xi.$tin.c workflow.s. The inventory s),stcm
conlained within th~ GwudianR.x openuing 5)$tcm provides an cfT«"tive 1001 (or managing inv~ntory that is u$Cd
~ccessr\l lly to mltn~e ph;umacy inventories aeross the nation. Pharmacy mo.nagement hIlS recognIzed that effe<ti\'e
use of the inyentor)' system requires additional trainin" especially in light of the prescriPlion workloads that must also
be addrt:sscd each day as a fif$t priority. Management has responded with In ongoing eITOr1 (0 r~Yisil institutions 10
proyide them with the technic:41 a.ssisunc~ and tminin.; lools necessary to fully ulili7.e the: syste:m, including a scries of
"so-oock" visits by phannacy operations teams. These "go-back" elTons are targeting .additional education on
invefuory and rel.ted rUnC"1ions. s uch as.he RTS. auto refill and auto ord« funcrions.

Implemenlation of Ihe Central 1-,11 Pharmacy will pruvide $ignljicanl im'enrory b~fil.l by shifting mO$1 of the
prf'scr-ipHon pt"OCessing 10 a cenll'alfacilil)! 'lther~ tconomits of scaft and «.nlrali.:~d. automaltd COfIIrois CM bit pUI in
place. Without this componau, cum~rn pharmacy operations would remain decentnllized., with duplicative inv~ ntol)' .
By redirecting m\lch of the work~d from the: (xilities, the CFP inilialive: will .significantly ~duce the inY~ntorie$
needed at th~ fac ility Ie:vel and will allow the (acililY pharmacy sUlff to better utl1iu their lim ited .-esour«s to manl\g~
the: inventories.
The final component in improvin& lhe management or medication [nventory is the long·tenn deployment o( Bn eMAR
to providt:: accountability for mediell-lion:s rrOm the point o( purchase to the point o( administration. Th~ benefits of an
eMAR arc di$(uS5ed earlier in this r~sponse.
T nI" l!(rr of Mloclisal inn't
M a n age m ~nt of (he: ttll OSret of med ications 15 II to mplex Issue th.t invo lvr:s m on)' m o't~ d isdplin~ Ihan simply
pharm llcy. Custody, tra nsporta t Ion, n ursi n$:. nlfdiea l a nd pharmllcy sia n at~ All in'o'ol'o'ed in t he prOCf s.
E J:l c nsi \'C~ dfol1 b underwa), 10 Idd rtu: ch en lu uu, but much M"o r k re ma ins. Policies and procedures havc been

Bureau of Criminal Investigations, Office of the Inspector General

Page 34

California Prison Healthcare Receiver’s response to
the special report (page 7 of 8)

developed th~l require the sending tIJcility 10 lriln$ter remllining patient medication to the receiving fadlif)' , It the
remaining quantity is less than 3 da)'S, the sending pharmacy is requ ired to fill 3 th~e-dlly s upply_ The reeei",ing
facility is expected to accept and usc the transferred medicat ions. Policies have also been developed to address the
issues relaled to inmates with multiple keep on person medica.l ions, s uch 8.5 inhaler$:. To pre·.-ent hoarding and for
safety reasons, medical polides state thai patients arc: cxPC!;ted 10 complete a. "'one for ooe" exchange or such item5
when they are i$.5ued (e.g.• in order to obtain a new inhaler, the inmilte is expected to tum in tbe old one). Edu('8tion
effol'U relaued 10 these: processes are ongoing,
A$ a result r;( the impleml!nlation ojlhe. Central Fill model, Ihl! JfondardizOliOn of I~ling wrd packaging should help
10 millgatt ' his issue, One point or res i.stanee to allowing pre$Criptions from otMT prisons hilS bttn concem over their
legitimacy, given the '""ide v&-iance in pa<kilgin& and labeling. As noted e-arlier, me long tenn resolution of this
com plex issue rem: with the deployment oran eMA R system that wou ld vlrtulIlI)' cJ iminate the need to transfer nurseadministered medictll,io ns. The inmtllc's e lectronic medication profile would be available lit any facilify throlJghoutthe
system and could be filkd using stock cards with no wmled doses_
BUODll'llendfliioni
CPHCS genern lly concurs with the recommendations of the 010
related to the recommendations an: already underway.

sum m a,iz~

below,

In many C8SC"S, activities

Esfablish and enforce pro«rirlTU to maximr:e! Ihe restocldng of UJablc drugs,
Steps 10 C$tIlblish a nd enror-ce proccdures 10 maximi~ the: restock ing or drugs are: already underway_ As
documented in o ur response, t!'lese steps are a lready resulting in Tecli.lmlUion $~lVi ngs cl)Ch month. With the recent
appointment by the Re«h'e:r or the Chier Pllarmacy (A). who has dirett line and diseiplinary authoriry over the
phllnnllCies, enforcement or these dYorts will be ('nhanced_ As the CFP corne1 online: inc.-e.:tMd opponunities for
recl;Jmation will be realized through the use of standud iud bli.stcr packal;inl; and mllf:h or the restock.ing .[I(tiviry
"ill shift 10 the
and be automated, O \'er the long tenn, the eMA R solution proposed ror the COCR .sY5tCm
" ill e liminate m uch of the need for restocking.

crr

•

De\'elop gllidelines 10 determin' when 10 PII,chase IJn;1 dos, 1"~11J,J loole lab medico/10m 10 Mll:tlml:e lite return of
drug,J t i) pharMacy im'f!nlory. and Mcmitor purdJases 10 el'lfllrt! compliance.
Through the P&T commil1ee. pharmacy admini5U1tion will review and upd.B.le relevant policy and pTOCedure.s to
provide more guktMce relating '0 the purchase of unit dose versus loose tablet medications. As tile new CFP
Imumes responsibi lity for processing me majority of the prescriptions, the use of blister packaging will resolve this
issue and maximize the o pponunitie.s to rec laim med ications eligible ror reissue,
Rn'/rw ~I ling stofling I~ls 'Wllhln phormaciu 10 ensllre thot DdeqlJQle r"owcu (Ire Q\'oilDbJe 10 rUlodt. drugs
10 inWtnlor),.

Stamn, levels are and wil l continue to be ~ on II quanerly ~is and re:c;:ommendlit ions ror adjustmCflIs madc
IJS nec;e.ssary. A staffing pattem for lhe CFP Implementation includes the responsibility for inventory oversight as a
primlU')' dUly of prison leve l phannacy SlnO"_ Pharmacy administration wi[1 continue 10 wort with Pharm.[1f:ist~ [n ~
barge·s on prioritiz.ing inventory and ~5toeki ng tasks within daily phamuu;;y work flows,
•

Monitor the pt"ucrlbing of cn~r. 'lr'·COUnl~r Items thot h(Il,"/t a ('mired medical nect!$3ify olld de\'t!lop procaUJ 10

limit prescrlbt:rs' ability 10 provide such Ilems..
The R«e h'er's clinica.! leadership team hll$ a lready developed and has sent OUt ror implementation a program
tarat-ting OTC uti lil-3lion . Oeveloped by a multidisciplinary clinical team, the initiatl\'e is desig.nc-d to rtduce the
use of non·mtdically nef:essary OTC pTodUf:t$. Phannacy Services is suppon ing the initiative wilh the production
ofmonthty OTC data as a pan of the: rnanaged care report SCtS, This data will assist regional and local clintC'.a1
leadership to manage OTe uS3se.

•

Identify InstJluliont and mdMdual prescribers thai consistenlly do not adhere 10 Ihe formulary and provJde
ulJ' ruCl;OfI$ IOrectify Ihflt pruCf'ibmg behavior including duclplinary OCIU}n if warramed.
Thb recommendation is alrelld), being addressed_ Monthl)' medical utilh:lltion rcpons provide tools Ihat Ihe
regionalmediet l director and service chiefs f:an u.sc to review and evaluate prescribing patterns, These rtpOrIs dri ll
down 10 the prescriber hwel. In addition. the monthly Med ication EflicienC)' and Quality Impro\'emc:nt Ilnd

State of California • April 2010

Page 35

California Prison Healthcare Receiver’s response to
the special report (page 8 of 8)

medkal program miUlagcmcnl reports provide data for the
be:h,wior,
•

s.upCrvi ~ing

ph),siciMs 10 use to influence presc:ribing

£H.Jure thal there i$ a strf)llg Clinical Pharmacy $peciaJi$II"l!Si!flU at prUIJnS to pro\lide 'raining and di,(!ctitm t()
,erJ,u:e thl: use ofrro"..fOrmlllary pr~-sCTip"()ns, maintain ac~ur(JJe im'trrloriu, (lnd prom(;JI~ ef/iciencJu.
In lieu of placing clinical pharmacists at prison si lC:~. the clinktr.1 phanniXy foeus has shifted (0 providing and

educating clinicallcadcrship on the managed ean!" tools avai lable to them . Pharmacothernpy I"iltdicltion conS'UlIs
have betn init~ted at a number of racililies. providing !pKific recommendalion~ (0 address i»ue5- 5-uch Il5- nl;Kl'
fonn ulal')' utilitation , In the kIn&er tenn, the u:nlltivc CP~ICS phannac)' adminimation :nl'ueture calls for thl'«
regional phmnacists who wi ll exercise operational and c:linical oversight. In addition, the imptemenlalion of CFP
is inltnded 10 IIUOW (!)Cility leve l pharmads" 10 spend more time intcractin, wi1h pre.s.cribcrs to o-p(imi;tc
pharmacotherapy and reduce COSIS.
•

Qe\.'tfop and Impft menl pt"oudllru 10 C11Sllre an

actu,al~ COtnp"/~r

Im'enlOl)' S}'Slem In ()I'd" to monll()l' JmwlIOI)'

slrrinkagt:. redu« sltlfflubor. provide accurale managrmrnl rtports, and prrwide Qccountabiliry.
Ph nu:.cy admini:nration will rtview and d~v~ lop as nc«s$ill)' IIddiliooal pr(K~dure5 oUllining the we of the
c:ompuu:rized invc:ntory S)'st~m. The policiC$ and prt)CCdures will provide morc .$pcdfic guidance with clemr
rt!5PQft5-ibi1itit"$ and CXp«1~lion~ outlined. Pharmacy adminiSlration " ,ill require: lbu.t the: PICs nm invmt~
adjU5tment repons regularly to enwre the im'cntory i.s being maintained. With the rt'Ctnt appoinlmenl by Ihe
Receiver o( the Chief o( PharmlK)' (A), who has direct !inc and diseiplinary authority over the: pharml.\cics,
oversight of this arta will be sU'tngme-ned .
Prmid~ gllidanc~
tflSpelJ$~d 10

10 pharmacy staff on
fN'isf)ll ho$pita~.

To account for medications dispensed to

t4(! t~

pri~on

compule,.

In~enttJl)l

system 10

QCC"Ounl l or medlC(llions

hospital -settings. pharmK)' adminLstr4tion will eontinue

encourage the com'ersion to a 1 db)' till process that ~liminates the need 10 make mrlnuill adjustments. This proc~ss
has bet-n successfu ll)' ~mplo)'~d in .severnl facili1ies within COCR ~ Irelld)' . In ~ddition, $upplemcnlallraining wi ll
be: provided to allow singJe day fill siles to accoun1 for inventory.
•

ellfUTe Ihotthe (J"IIto-rejifl and aUle>-reordtr 1)'slems work tJJtClillely willwu, m(mipu{uling 'he th'cJronic im't/t/Ol")'.
The Reeeiver's pbannac)' consultant will conduct an applicalion lo,ic r~Yiew of Ihe au10 rerill and muto rcorder
SystClnS 10 ~nsurc that 1hey work as intended and to document how the)' do so. Written procedure-s and ooclitional
lmining material deUl ilin& the comel mc:lhods of maintain ing and adjusting inyentory in the compuler s)',stem wi ll
Ix' d~ve loped and di$$cminatcd by phllrnl-llC)' administration.

•

Momlor Irunsft"ing inmates and identify any pris()l1S Ihal a,.~ l1{)l/on...arding m(!diC(IJions 10 1hl/! "«eMrr8 pri3on,'
idenlify 1M cause ofthelailure to lollow fN'OCf.durl/! end ,oJ.e approp,;ore oClion
£Mur~ Ihol prisonJ Ir(lns/~rring mmales cui take ;"'0 account Ihe quanlity of pret/ioudy di3pellJf-d medfcollons
Wore reqlluJing (I Ihrf:1t day supply from 'he pharmacy. ami monftor lOT compliance.
{)c\.-efop a procedure to 4'.fUUr~ tna' Ihi! r«eiving institution's ph(Jrm(lC)' dod nol n:/1I1,,,.:dl(;Ollo,, b.:forlJ il is
necenary. and m onilor for compliance.
To monitor inmate transfCll and iclenlify prisons that Ire not rorwarding medic:otions, (he Receiver and COCR
Executive teams will appoinl an interdisciplinary work group to n!"view the medication lrans(er issue. The work
Grou p will include: medical. menial health. dentaL. nursina. phllrmacy. custody and transportat ion representatlyes
and be charged with the goal o( stondardil ing 1he processes involved in transfer of medieodons. Addilionally. this
work &roup would be charged with establiShing responsibilities ror rcponina. rollowing. up and cOITeCtin& (Ilcililies
who (a il 10 follow the ~t3ndardi7.ed processes.

•
•

Bureau of Criminal Investigations, Office of the Inspector General

Page 36

The Office of the Inspector General’s Comments on
the Receiver’s Response
Although we are not responding to all of the Receiver’s statements as outlined in their
response, we are commenting on the following specific issues to provide clarity and
perspective:
‡  The Receiver points out that since 2007, there has been a $4.7 million offset to the reported
$7.7 million annual loss resulting from what the Office of the Inspector General reported
as the lack of an effective usable medications restocking policy. The offset was a credit
received from a contract with Guaranteed Returns for medications returned to the pharmacy
and subsequently destroyed through the program.
However, we found that pharmacists used the Guaranteed Returns program inappropriately
by destroying drugs that could have been restocked. Although the Guaranteed Returns
program provided partial credit for drugs that met specific criteria, pharmacists used this
program as a quick and easy way to process the returned drugs out of the pharmacies
instead of taking the time to identify the drugs that were eligible for restocking.
Consequently, pharmacies likely received pennies on the dollar and had to purchase drugs
to replenish drug inventories.
 The Receiver noted that return-to-stock (RTS) reports initiated in September 2008 reported
a total savings for that month of $300,000. Returns since that date have reportedly
quadrupled, so that by February 2010 the amount of savings was nearly $1.3 million per
month.
However, it is important to note that when the report was initially generated in September
2008, only 15 prisons were on the GuardianRx inventory system. By February 2010, there
were at least 29 prisons on GuardianRx, almost twice the number of prisons that were
reporting in September 2008. Therefore, it is unclear whether the dramatic increase in RTS
figures is the result of a more effective restocking program or is merely the result of more
prisons using the GuardianRx inventory system.
 In response to our finding that not ensuring the use of approved medications costs
California taxpayers an additional $5.5 million annually, the Receiver asserts that nonformulary costs decreased from $19.76 per inmate per month in 2007 to $18.38 per inmate
per month in 2009.
However, we note that the non-formulary costs were reduced in 2008 to $14.98 per inmate
per month. The basis for our report’s finding was the difference between the failure to
maintain this lower 2008 rate of $14.98 and the resulting significant increase (almost a
third) in 2009. As we reported in our finding, the consequence of this lack of oversight was
an additional cost to California taxpayers.
‡ Circled numbers correspond to CDCR’s response text beginning on page 30.
State of California • April 2010

Page 37

 Even though we found that the GuardianRx inventory system was unreliable, resulting in
increased staff labor costs, the Receiver believes that the “GuardianRx operating system
provides an effective tool for managing inventory that is used successfully to manage
pharmacy inventories across the nation.” The Receiver does acknowledge the need for
additional training on the system.
However, the Receiver’s response did not address our findings that inventory counts were
of no value, and that the auto-refill and auto-reorder processes lacked functionality. Clearly,
in the manner currently being used by the Receiver in California, the GuardianRX system is
an ineffective management tool. This unreliable system results in increased costs.
The Receiver also believes that the Central Fill Pharmacy project will provide significant
inventory benefits.
However, it is yet to be determined what effect this will have in maintaining an accurate
automated inventory system. We further note that the Central Fill Pharmacy project,
developed by the Receiver and originally scheduled for operation in February 2009, has
been delayed until May 2010.

Bureau of Criminal Investigations, Office of the Inspector General

Page 38

SPECIALREPORT
REPORT
SPECIAL
INMATE CELL PHONE USE ENDANGERS PRISON
SECURITY AND PUBLIC SAFETY

Lost Opportunities for Savings Within
California Prison Pharmacies
OFFICE OF THE
INSPECTOR GENERAL

OFFICE OF THE INSPECTOR GENERAL
DAVID R. SHAW

INSPECTOR GENERAL

STATE OF CALIFORNIA

David R. Shaw

MAY 2009

INSPECTOR GENERAL



Samuel Dudkiewicz

CHIEF DEPUTY INSPECTOR GENERAL (a)

Kerry McClelland
DEPUTY INSPECTOR GENERAL, IN-CHARGE (A)

Rusty Davis

Deputy Inspector General

Chris Eagle

Deputy Inspector General

Anna Galvan

Deputy Inspector General

Sueann Gawel

Deputy Inspector General

Debra Maus

Deputy inspector general

STATE OF CALIFORNIA
April 2010
WWW.OIG.CA.GOV