The Drug Enforcement Administration (“DEA”) and the states are struggling with how to confront the challenges posed by the opioid abuse crisis. One aspect of this problem relates to employee theft, particularly at the pharmacy level. The California Board of Pharmacy (“BOP”), as well as other states, has reported a growing concern with theft reports related to employee diversion. In some cases, there have been instances in which pharmacy technicians and other employees diverted large quantities of controlled substances undetected from pharmacies over a long period of time unbeknownst to the Pharmacist-In-Charge (“PIC”) or consultant pharmacist.
While Federal and State law have long required pharmacies to maintain an inventory of all controlled substances on-hand, and records of controlled substances received and dispensed, there has not been a uniform requirement to routinely reconcile these records. But California’s novel approach to this issue requires all PICs and consultant pharmacists to monitor and account for their pharmacy’s schedule II transactions on at least a quarterly basis, and other controlled substances less frequently. In other words, California is requiring pharmacies to conduct a reconciliation to balance their controlled substance checkbook.
The California BOP believes that “[b]y requiring at least a quarterly inventory of all Schedule II controlled substances, pharmacists, pharmacies, and clinics will be better equipped to spot and stop employee drug diversion from the pharmacy earlier and prevent excessive drug losses from occurring.” Initial Statement of Reasons, Reconciliation and Inventory Report of Controlled Substances, California Board of Pharmacy, 1.
As of April 1, 2018, California pharmacies and clinics are required to conduct periodic inventories and inventory reconciliations for all controlled substances. Cal. Code Regs. tit. 16, § 1715.65(a). Pharmacies, as well as surgical and outpatient clinics licensed by the BOP, must on a quarterly basis complete inventory reconciliation reports for all federal schedule II substances. Id. § 1715.65(c). The regulation does not mandate the frequency for pharmacies and clinics to complete reconciliation reports for other controlled substances. Id. § 1715.65(a). PICs or the clinics’ consultant pharmacists must also establish “secure methods to prevent losses of controlled drugs” and establish written policies and procedures for completing reconciliation reports. Id. § 1715.65(b).
Completing inventory reconciliation reports requires pharmacists or their designees to:
- Physically count, not estimate, all controlled substances;
- Review all relevant acquisition and disposition records since the last inventory;
and - Compare acquisitions against dispositions to identify any variances between what
quantities are accounted for against what should be accounted for. Id. § 1715.65(c)(1)-(3).
In other words, pharmacists must attempt to balance the controlled substances on-hand during the prior physical count and receipts against dispositions and quantities on-hand during the most recent count. Pharmacists should take their physical counts at the Beginning or Close of Business, and document when they took the count. If, For example, the first count was taken at the Beginning of Business on May 1st , the pharmacist will take into account all transactions that occurred on May 1st and afterward; if the count was taken at the Close of Business on May 1st, the pharmacist will exclude May 1st transactions and include only transactions that occurred May 2nd and afterwards.
Ideally there will be no variance and the pharmacy can account for all controlled substances handled during the period. A negative variance can indicate incomplete or inaccurate records or a loss; a positive variance can indicate recordkeeping errors. The reconciliation report must identify the possible causes of any overage, but does not require pharmacies to otherwise notify the board of overages. Id. § 1715.65(c)(5). Pharmacies and clinics must report all identified losses with known causes to the board in writing within 30 days of discovery, and losses by theft, self-use or diversion by a board licensee within 14 days of discovery. Id. § 1715.65(d). The pharmacy or clinic must investigate losses with unknown causes and take corrective action to prevent additional losses. Id.
New PICs must complete an inventory reconciliation report within 30 days of becoming the PIC of a pharmacy. Id. § 1715.65(f). Outgoing PICs should also complete an inventory reconciliation report upon leaving a pharmacy. Id.
Inpatient hospital pharmacies must complete separate inventory reconciliation reports for controlled drugs stored within the hospital pharmacy and for each of the pharmacy’s satellite locations. Id. § 1715.65(g). The PICs of pharmacies that service “automated drug delivery systems” such as Pyxis machines, regardless of where they are located, must ensure that:
- They account for all controlled substances added to automated drug delivery
systems; - Access to automated drug delivery systems is limited to authorized facility
personnel; - Any discrepancy or unusual access to controlled substances in the automated drug
delivery systems is evaluated; and - Confirmed losses are reported to the board timely. Id. § 1715.65(h).
The individuals conducting the inventory will sign and date the inventory reconciliation report, and the PIC or professional director of a clinic will countersign the report. Id.
§ 1715.65(e). Pharmacies and clinics must maintain all records used for each inventory reconciliation report in a readily retrievable form for at least three years. Id.
§ 1715.65(c)(4).
The new California inventory reconciliation and loss reporting requirements are stricter than some requirements under the federal Controlled Substances Act (“CSA”), but less strict for others. For example, California requires pharmacists to count schedule II substances quarterly, and other controlled substances quarterly or less frequently, and then reconcile the transactions. The CSA requires registrants to conduct an inventory when they first begin operations and then at least every two years thereafter. 21 C.F.R. § 1304.11(b), (c). The CSA does not require registrants to reconcile their controlled substance transactions.
California requires pharmacies and clinics to report losses and known causes to the board in writing within 30 days of discovery, but they must report losses by theft, self-use or diversion by a board licensee within 14 days of discovery. By contrast the CSA requires pharmacies and clinics to notify the DEA Field Division Office in their area in writing of the theft or significant loss of controlled substances within one business day of discovery. Id . § 1301.76(b). This is usually accomplished via fax or email followed by a Report of Theft or Loss of Controlled Substances, DEA Form-106, when all of the facts are known. California requires pharmacies to report any controlled substance loss while the CSA requires registrants to report all controlled substance thefts and only “significant” losses. FAQs: Inventory Reconciliation Regulation, California Board of Pharmacy, Mar. 30, 2018; 21 C.F.R. § 1301.76(c). In addition, California requires pharmacies to maintain reconciliation records for three years, a year longer than required by the CSA. 21 U.S.C. § 827(b).
In summary, California’s new reconciliation requirement should help pharmacies to identify potential thefts and losses on a timelier basis. On the other hand, it may also result in increased reporting of discrepancies to the California BOP where there may not be a real concern about thefts or losses. It remains to be seen how the California BOP will react to these reports and whether it will increase pharmacy inspections or investigations.