Special Report on Prison Pharmacy Operations

Special RepoRt loSt oppoRtUNitieS FoR SaViNGS WitHiN caliFoRNia pRiSoN pHaRMacieS oFFice oF tHe iNSpectoR GeNeRal DaviD R. Shaw inSpectoR GeneRal State of califoRnia apRil 2010 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 In January 2007, the Receiver entered costs California taxpayers an additional $5.5 into an agreement with Maxor National million annually. 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, semi- annual 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 cost- effective 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. $2 $1 $1.91 $0.59 $0.83 $2.04 $0.67 $0.83 CDCR Texas Federal CDCR Texas Federal 2006/2007 Dept. of Bureau of 2007/2008 Dept. of Bureau of Corrections Prisons Corrections Prisons 2006/2007 2006/2007 2007/2008 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 non- formulary 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 120 this committee can add or delete items from the formulary. Since formulary medications cost, 100 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. 80 60 The lead pharmacist supervises the pharmacists and pharmacy technicians who prepare and 40 dispense medications upon orders from appropriately licensed medical professionals. After 20 Figure 2: Comparing rates of change, 2000 - 2008. 0 From 2000 to 2008, CDCR more than doubled its spending on inmates’ medications, yet the total -20 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% 2000 2001 2002 2003 2004 2005 2006 2007 2008 CDCR pharmeceutical expenditures 0 19.56 36.45 39.75 39.07 58.42 88.71 100.34 106.40 CDCR prison population changes 0 -0.31 -2.48 -0.66 0.93 1.35 6.52 6.98 5.54 Consumer price index of prescription drugs 0 5.43 10.9 14.33 18.11 22.28 27.51 29.35 32.55 Bureau of Criminal Investigations, Office of the Inspector General 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 three- day 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 Page 11 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 medications are often incinerated. Source: Office of the manufacturer for partial credit. While Inspector General. many of the returned medications 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 Page 13 In discussing with pharmacists how they determine whether to When a pharmacist was asked 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 purchased our drugs.” our sample indicates that name brand drug manufacturers charge 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 Photo 5: Typical shelving of bulk and unit dose pharmaceutical stock. the staffing shortage in his pharmacy by Bottles contain up to 1,000 pills while unit doses authorizing overtime for pharmacy staff to are typically ten to a card. Source: Office of the sort returned medications. This pharmacist Inspector General. 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. 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 return- to-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 $$1100,,000000 $5,034 $616 $810 $451 $1,016 $1,731 $207 $1,751 00 Monthly June 09 July 09 August 09 September 09 Totals $1,878 $13,850 $6,992 $146,199 Bureau of Criminal Investigations, Office of the Inspector General 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 non- approved 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 — Lead Pharmacist Drug Administration authorizes a number of new medications, alternative preparations for existing medications, and over-the- counter 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 (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. Photo 7: This binder shows 760 non-formulary requests at one prison over a two month period. In an effort to correct this issue, Maxor included two goals in its action plan: A) to Source: Office of the Inspector General. Bureau of Criminal Investigations, Office of the Inspector General Page 18 “Over here we do a lot develop meaningful and effective centralized oversight, control of non-formulary, and it and monitoring over the pharmacy services program, and B) to seems like every request implement and enforce clinical pharmacy processes including for non-formulary gets formulary controls. 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 are approved, only three and procedures, 3) developing a monitoring tool, and 4) creating 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 “The computer inventory is medication utilization data. However, most pharmacy staff not a useful tool for us.” told inspectors that the new computer inventory system was 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 12,299 Computer Inventory Abilify 20mg 4,842 11,998 Abilify 30mg 4,483 13,770 Depakote ER 250mg 5,052 15,933 Depakote ER 500mg 14,634 18,242 Effexor XR 75mg 6,292 16,259 Effexor XR 150mg 4,663 18,215 Geodon 40mg 5,570 13,476 Geodon 60mg 4,473 15,051 Geodon 80mg 6,423 15,007 Risperidone 2mg 6,440 14,285 Risperidone 3mg 5,191 24,360 Zyprexa 10mg 3,911 13,827 Zyprexa 20mg 3,131 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 Actual Total Total Cost Total Cost Drug Name & Dosage Total Computer Difference Per Unit Differential Abilify 10mg 4,724 12,299 7,575 $12.60 $95,445.00 Abilify 20mg 4,842 11,998 7,156 $17.81 $127,448.36 Abilify 30mg 4,483 13,770 9,287 $17.81 $165,401.47 Depakote ER 250mg 5,052 15,933 10,881 $1.76 $19,150.56 Depakote ER 500mg 14,634 18,242 3,608 $3.23 $11,653.84 Effexor XR 75mg 6,292 16,259 9,967 $1.75 $17,442.25 Effexor XR 150mg 4,663 18,215 13,552 $4.49 $60,848.48 Geodon 40mg 5,570 13,476 7,906 $5.93 $46,882.58 Geodon 60mg 4,473 15,051 10,578 $7.19 $76,055.82 Geodon 80mg 6,423 15,007 8,584 $7.19 $61,718.96 Risperidone 2mg 6,440 14,285 7,845 $0.52 $4,079.40 Risperidone 3mg 5,191 24,360 19,169 $0.58 $11,118.02 Zyprexa 10mg 3,911 13,827 9,916 $12.40 $122,958.40 Zyprexa 20mg 3,131 10,745 7,614 $24.80 $188,827.20 T otal 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 cannot work with inventory shows less than is needed, the computer program will not allow 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 Pharmacy staff described instances in which they had allowed at first because Maxor the system to automatically place their medication reorder, only insisted, but we got so much to receive unneeded items and/or excessive quantities. One staff stuff we didn’t need that it member estimated that 70 percent of the items suggested by the would be dysfunctional to auto-reorder function were not needed. For example, when staff trust the system.” allowed the auto-reorder system to place an order at one men’s — Lead Pharmacist 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. State of California • April 2010 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 re- stocked 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 • 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. 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. 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) State of California • April 2010 Page 29 California Prison Healthcare Receiver’s response to the special report (page 2 of 8) 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) State of California • April 2010 Page 31 California Prison Healthcare Receiver’s response to the special report (page 4 of 8) †  † 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) State of California • April 2010 Page 33 California Prison Healthcare Receiver’s response to the special report (page 6 of 8)   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) State of California • April 2010 Page 35 California Prison Healthcare Receiver’s response to the special report (page 8 of 8) 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 non- formulary 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 SpeScPEiaCIlAL R ReEPpOoRTR t INMATE CELL PHONE USE ENDANGERS PRISON SECURITY AND PUBLIC SAFETY loSt oppoRtun itieS foR SavinGS within califoRnia pRiSon phaRmacieS OFFICE OF THE INSPECTOR GENERAL oFFice oF tHe iNSpectDoAVIRD R G. SHeAWN eRal INSPECTOR GENERAL STATE OF CALIFORNIA David R. ShaMwAY 2009 inSpectoR GeneRal   Samu el 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