(213) 240-8101

Honorable Board of Supervisors
March 1, 2001
Page 2

FISCAL IMPACT:

The contractor will receive 9% to 10% (based upon type of pharmaceutical/drug handled [i.e., non-controlled or controlled substances]) of the total refund received from pharmaceutical/drug manufac-turers by participating County facility pharmacies, and a $1 per-pound disposal (non-hazardous
and hazardous waste) fee for pharmaceutical/drug products that do not qualify for credit compensation, and cannot be reverse distributed. Contractor is limited to receiving no more than 15% of the total refund received by a County pharamacy for all services performed by Contractor.

The total cost for pharmaceutical reverse distribution services for Fiscal Year (FY) 1999-00 was $162,879, based on total County facility pharmacy refunds of $1,614,930, or an actual total refund of $1,452,051 ($1,614,930 refund - $162,879 costs = $1,452,051).

FINANCING:

There are no net County costs under this agreement; costs for pharmaceutical reverse distribution services are paid entirely from the total refunds received. Since EXP bills on a percentage of the total dollar value recovered, it is in their best interest to ensure that the County obtains the maximum compensation for its reverse distributed pharmaceutical/drug products. (Funds from a participating County facility=s pharmacy budget may be used to pay the contractor since the reverse pharmaceutical refunds received by the County may include manufacturers= credits and/or drug replacements that may not be acceptable to contractor for use as payment. However, the use of such funds will not reduce the participating County facility=s pharmacy budget, since manufacturers= credits and/or drug replacements will be used to offset any pharmacy expenditures.) Note that, each Department (Department of Health Services, Department of Mental Health, Probation and Sheriff=s Departments) with County pharmacies participating in the program will be responsible for tracking their own manufacturer credits and/or drug replacements received and for paying their own pharmaceutical reversed distribution services bills, which were formally paid under a Purchase Order (PO) which has now since expired, and will be converted to the agreement format as described herein.

FACTS AND PROVISIONS/LEGAL REQUIREMENTS:

Normally, supply orders and use of supplies are adjusted by a County pharmacy from time-to-time to ensure that the majority of supplies held by the pharmacy are used before they reach their packaging expiration date. Since County pharmacies must order pharmaceutical/drug products in quantity, and maintain par levels of pharmaceuticals/drugs at all times (to properly serve the public and for contingency purposes) at each of its locations (including but not limited to, maintaining pharmaceuticals/drugs on hospital wards, clinics, and outpatient facilities), such pharmaceutical and drug stock cannot always be monitored and adjusted to optimize pharmaceutical par levels without exceeding packaging expiration dates, causing the pharmaceuticals/drugs to become non-dispensable.

Under the Controlled Substance Act of 1970, the Drug Enforcement Agency (DEA) assigned numbers to drugs based on the amount of narcotic, or narcotic-like substances, present in the drug and its level of habit forming or addicting propensities. The schedule numbers are "I" through "V", with "II" being

Honorable Board of Supervisors
March 1, 2001
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the strongest and "I" being illegal. The handling of scheduled drugs requires a DEA license, and the use of special control and inventory procedures prescribed by federal and state regulations. (Absence of such numbers on the drug label renders the drug non-scheduled [non-controlled] which can be handled and processed without DEA restrictions). EXP is a DEA registered reverse distributor, licensed to handle all scheduled (II through V) drugs, or controlled substances, and also possesses other related licenses and permits (i.e., Environmental Protection Agency [EPA] license, California Department of Health Services permit, and Weighmaster license) required to provide pharmaceutical reverse distribution services (including biohazardous waste disposal of non-returnable pharmaceutical/drug products) under the recommended agreement. In addition, EXP is the sole reverse distributor located in California and licensed by the California State Board of Pharmacy (i.e., California State Pharmacy Wholesaler=s license). An approved sole source letter is on file with DHS which discusses additional details.

Basic pharmaceutical reverse distribution services include, but are not limited to: 1) sorting pharmaceuticals/drugs by manufacturer, lot number, and expiration date; 2) generating of return inventory reports and all necessary DEA forms; 3) providing all packaging materials, and the boxing, packaging, and mailing/shipping of pharmaceuticals/drugs for return shipment to manufacturers; 4) preparing returned drug summary reports with anticipated return value/credits; and 5) disposing of all non-returnable pharmaceuticals/drugs, when requested.

All manufacturers credits, refunds, and/or drug replacements, are sent directly by the manufacturers to each County facility pharmacy participating in the reverse distribution program (See Attachment B, for list of participating facilities). This allows each facility to determine the dollar value of all manufacture credits, refunds, and/or drug replacements, and to confirm that EXP bills are within the appropriate percentage to be charged.

It should be noted that not all pharmaceuticals/drugs are returnable for credit or replacement. Non-returnable pharmaceuticals/drugs are considered pharmaceutical medical waste (divided into non-hazardous waste [usually non-scheduled pharmaceutical/drugs] and hazardous waste [usually scheduled/controlled pharmaceuticals/drugs]). The Department will have the option to use EXP to dispose of both non-hazardous and hazardous pharmaceutical waste under this agreement directly, since it offers a more secure method of disposal than using the Department=s current biohazardous waste contractors, especially when disposing of scheduled pharmaceuticals/drugs. EXP will only dispose of pharmaceutical waste which is a by-product of the reverse management process.

Under the agreement, either party may terminate for convenience upon 30 days advance written notice to the other party.

The agreement (Exhibit I) has been approved as to form by County Counsel.

Attachments A and B provide additional information.

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March 1, 2001
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CONTRACTING PROCESS:

It is not appropriate to advertise County sole source agreements on the Countywide Office of Small Business Web Site.

IMPACT ON CURRENT SERVICES (OR PROJECTS):

Provision of pharmaceutical reverse distribution services will assist County facilities in obtaining maximum manufacture credits and/or drug replacements for expired/damaged pharmaceuticals/drugs,
while achieving maximum inventory benefits.

When approved, this Department requires three signed copies of the Board's action.

Respectfully submitted,

Mark Finucane
Director of Health Services

MF:bb

Attachments

c: Chief Administrative Officer
County Counsel
Executive Officer, Board of Supervisors

BLECD371.GI
gti:02/13/01

ATTACHMENT A

1. TYPE OF SERVICE:

2. AGENCY ADDRESSES, CONTACT PERSONS, AND TELEPHONE NUMBERS:

Contractor:

EXP Pharmaceutical Waste Management, Inc.
1581 Orange Avenue, #C
Costa Mesa, California 92627
Attention: Mr. Timothy Fahy, South West Regional Manager
Telephone / Facsimile (FAX) Number: (800) 350-0396 / (949) 548-5849

3. TERM:

4. FINANCIAL INFORMATION:

5. ACCOUNTABLE FOR MONITORING AND EVALUATION:

6. APPROVALS:

Clinical and Medical Affairs: Gail V. Anderson, Jr., M.D., Acting
Associate Director

Contracts and Grants Division: John H. Ricks, Chief

County Counsel (approval as to form): Sharon A. Reichman, Senior Deputy County Counsel

Attachment B
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County Pharmacies

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