MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-second Session
March 31, 2003
The Senate Committee on Commerce and Labor was called to order by Vice Chairman Warren B. Hardy II, at 7:18 a.m., on Monday, March 31, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4401, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Warren B. Hardy II, Vice Chairman
Senator Ann O'Connell
Senator Raymond C. Shaffer
Senator Joseph Neal
Senator Michael Schneider
Senator Maggie Carlton
STAFF MEMBERS PRESENT:
Scott Young, Committee Policy Analyst
Courtney Wise, Committee Policy Analyst
Makita Schichtel, Committee Secretary
Johanna Downey, Committee Secretary
OTHERS PRESENT:
Steven Mack, Chairman, Certified Court Reporters’ Board of Nevada
Dawn Jackson, Executive Director, Certified Court Reporters’ Board of Nevada
Karen Yates, Nevada Court Reporters Association
K. Neena Laxalt, Lobbyist, Nevada State Board of Veterinary Medical Examiners
Adam Levine, Attorney
Fred Olmstead, Deputy Attorney General, Nevada State Board of Veterinary Medical Examiners
Debbie Machen, Executive Director, Nevada State Board of Veterinary Medical Examiners
Gary Ailes, D.V.M., President, Nevada State Board of Veterinary Medical Examiners
Beverly Willard, Nevada State Board of Veterinary Medical Examiners
Fred L. Hillerby, Lobbyist, Nevada Veterinary Medical Association, and Nevada State Board of Pharmacy
Keith W. Macdonald, Executive Secretary, State Board of Pharmacy
Julie Larsen, Pharmacist Supervisor, Washoe Medical Center
Mary Lau, Lobbyist, Retail Association of Nevada
Helen A. Foley, Lobbyist, Association of Nevada Pharmaceutical Wholesalers
Steven A. Gibson, Attorney, Association of Nevada Pharmaceutical Wholesalers
Stephen D. Quinn, Deputy Attorney General, State Board of Pharmacy
Louis Ling, General Counsel, State Board of Pharmacy
Vice Chairman Hardy:
We will open the hearing on Senate Bill (S.B.) 395.
SENATE BILL 395: Revises provisions governing court reporters. (BDR 54-548)
Steven Mack, Chairman, Certified Court Reporters’ Board of Nevada:
This bill is a cleanup of provisions of chapter 656 of Nevada Revised Statutes (NRS). The most important change will give the board greater flexibility in discipline matters. Currently the board may suspend, revoke, or refuse to issue or renew the license of a court reporter. This bill would also allow the board to place a court reporter on probation for 1 year and/or impose an administrative fine for lesser violations. The remainder of the bill is minor changes and cleanup language.
Vice Chairman Hardy:
Section 1 allows you to impose the lesser penalties in addition to the greater, correct?
Mr. Mack:
Yes. The wording is “in addition to or in lieu of.” These penalties can be imposed on individual court reporters and on court reporting firm.
Senator Neal:
Could you explain what you are attempting with the changes in section 8 and why?
Mr. Mack:
Section 8 was written to answer security concerns. The certified court reporter (CCR) number is required on transcriptions, but it does not need to be listed on everything a court reporter produces.
Senator Neal:
Why take it out of advertising and keep it on business cards?
Mr. Mack:
Typically court reporters give their business card to judges and lawyers at every deposition.
Vice Chairman Hardy:
Why did we have the CCR number on advertisements originally? Is it to enable the public to report a bad court reporter?
Mr. Mack:
The board is small enough that we do not require a CCR number to identify someone. A last name is usually enough for us to find the person.
Dawn Jackson, Executive Director, Certified Court Reporters’ Board of Nevada:
We require the CCR number on transcripts for the convenience of courts and attorneys researching transcripts older than 2 years. They may know the name of the court reporter or they may only know the CCR number.
Senator Neal:
In section 7, subsection 12, why did you change the standard from “repeatedly” to “deliberately”?
Mr. Mack:
After an incident in which a court reporter failed to transcribe notes for the Nevada Supreme Court, the Nevada Supreme Court asked us to change the language to make it clear that a single incident was enough to warrant the penalty.
Vice Chairman Hardy:
I am concerned about changing the standard from competence to intent. This might be beyond the scope of the board to determine.
Mr. Mack:
I think the Nevada Supreme Court’s concerns could be resolved by omitting both “deliberately” and “repeatedly.” Subsection 12 would then read, “Failed without excuse … .“
Senator Carlton:
I would like a written explanation of the difference between “willfully” and “deliberately.”
Mr. Mack:
This language was inserted by Legislative Counsel Bureau (LCB) staff. They would be better able to explain it.
Senator Neal:
In the same subsection, what is the meaning of “any other reasonable time required for filing a transcript”?
Mr. Mack:
According to the statutes and the Nevada court rules, there are some proceedings that require a certain timeframe to produce a transcript. In other situations, there may not be a specific deadline set by statute. There is one standard for legal proceedings and another for private parties hiring a court reporter.
Senator Shaffer:
What is your justification for a $5000 fine?
Mr. Mack:
Of all the professions in the courtroom, the court reporter is the most important. As an attorney, I have handled many cases that turned on a single word in the transcript. It is crucial that court reporters do their jobs accurately and quickly. The size of the fine is intended to impress upon them the importance of their work.
Senator Carlton:
Do you have a schedule of fines?
Ms. Jackson:
Not yet. We have been in contact with other boards to get an idea of a reasonable fine schedule.
Senator Carlton:
Subsection 10 of section 7 refers to “any regulation adopted by the board relating to unprofessional conduct.” Can you give me an example of unprofessional conduct not already covered in section 7?
Mr. Mack:
The original language prohibited “unprofessional conduct,” which is too vague and open-ended. The new language confines it to regulations adopted by the board.
Ms. Jackson:
An example of this would be conflict of interest, such as taking depositions for relatives without disclosing the relationship.
Senator Carlton:
Can I assume you do not want to change any of your fees for the next 18 months?
Mr. Mack:
Correct.
Karen Yates, Nevada Court Reporters Association:
We support this bill. We have worked closely with the board to develop this language.
Vice Chairman Hardy:
We will close the hearing on S.B. 395. We have a committee introduction of Bill Draft Request (BDR) 58-1322.
BILL DRAFT REQUEST 58-1322: Provides for tax equalization between direct broadcast satellite television companies and community antenna television companies. (Later introduced as Senate Bill 492.)
SENATOR TOWNSEND MOVED TO INTRODUCE BDR 58-1322.
SENATOR CARLTON SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR NEAL VOTED NO.)
*****
Vice Chairman Hardy:
We will open the hearing on S.B. 427.
SENATE BILL 427: Makes various changes relating to veterinarians. (BDR 54‑472)
K. Neena Laxalt, Lobbyist, Nevada State Board of Veterinary Medical Examiners:
I have written testimony (Exhibit C). This bill has three primary foci. In the 68th Legislative Session, the Legislature gave the board the authority to recoup “all costs” when disciplinary action was taken against a licensee as a result of a consumer complaint. The board has interpreted “all costs” to include all expenses incurred in the investigation and prosecution of a licensee, including attorney’s fees, and that these costs may be recovered when disciplinary action has been imposed. Sections 1 and 13 clarify the definition of “all costs.”
Section 6 revises the procedures for the disposition of consumer complaints. It also deals with the confidentiality issues relating to complaints that are dismissed and those where discipline is imposed. The remainder of the bill is housekeeping.
Senator O'Connell:
I received a letter from Adam Levine regarding this bill that raises many questions (Exhibit D).
Adam Levine, Attorney:
The board has not seen this letter but is familiar with the issues it raises. Our main concern about the bill has to do with disciplinary hearings against Sheryl D. Babyak, D.V.M., and Bradley Gilman, D.V.M., in which I represented the doctors before the board. Imposing costs for disciplinary actions is a violation of due process. Because a licensing board is an arm of the State, due process requires the board to give a hearing to a licensee before taking action. The courts have recognized that it violates due process if you impose the costs of the hearing upon the licensee regardless of who prevails at the hearing. The threat of potentially unlimited costs has a chilling effect on the exercise of a constitutional right.
In Dr. Gilman’s case, there was no negotiation by the board when they went to a hearing. By the time I got involved in the case, the board’s position was the only thing they would accept was the surrender of Dr. Gilman’s license. Dr. Gilman chose to go to a hearing, and the board convicted him without revoking his license. Even so, he was ordered to pay over $19,000 in costs. This amount included meals for the board members and their staff.
Vice Chairman Hardy:
Are there any other boards with sweeping recovery rights like this?
Fred Olmstead, Deputy Attorney General, Nevada State Board of Veterinary Medical Examiners:
Yes. This board was previously allowed to recoup all costs. This is done because the cost of a board’s examination comes out of the board’s coffers. If they cannot recover their costs, their ability to protect the public by investigating and disciplining licensees is compromised. Most other boards have the ability to recoup costs. This bill merely defines the term. Mr. Levine’s comments have been made previously in litigation.
Vice Chairman Hardy:
Was this language taken from some other statute?
Courtney Wise, Committee Policy Analyst:
The Legislature gave the boards the right to recoup these costs. This issue will also be dealt with in S.B. 364, which covers all professional boards.
SENATE BILL 364: Makes various changes to provisions relating to investigations and proceedings for disciplinary action by regulatory bodies which regulate certain professions, occupations and businesses. (BDR 54‑707)
Senator O'Connell:
When the opposing party wins the case, are they then responsible for costs?
Ms. Wise:
I will check into that. I will also have to take a look at the definition of “winning.” In this case, the doctor’s license was suspended. Even though that is not what the board was advocating, I am not sure if that would be seen as “winning the case.”
Senator O'Connell:
Maybe a better term would be “prevailing.”
Vice Chairman Hardy:
This is the sort of matter that should be made uniform for all boards.
Senator O'Connell:
Is this matter still in litigation?
Mr. Levine:
The Babyak case is resolved. Dr. Babyak was the prevailing party; she did not receive fees or costs, and the case was not taken to the Nevada Supreme Court. In the Gilman case, the district court upheld the suspension on judicial review but sua sponte imposed a complete stay on enforcement of the order pending appeal to the Nevada Supreme Court. The issue was argued before the Supreme Court on January 13, and their decision is pending.
Vice Chairman Hardy:
Is your primary concern with regard to due process that costs can be required even when the licensee prevails?
Mr. Levine:
No. The statute as it currently exists is facially valid; that is, it may or may not be applied unconstitutionally. It says the board may recoup the cost of imposing discipline. Some of the costs of imposing discipline do not arise out of the actual hearing. If the hearing costs are imposed, the statute has been applied unconstitutionally. This bill expressly authorizes the hearing costs to be imposed, which would create a facial invalidity.
Mr. Olmstead:
We took this language from legislation in the 71st Legislative Session. Mr. Levine and the board have been in litigation for years. We respectfully disagree with virtually everything he said. We view this is as constitutional as written and constitutional as applied.
Senator Neal:
Were these public hearings?
Mr. Levine:
Yes.
Senator Neal:
Are there ways for the board to raise this money other than from the prevailing party?
Mr. Olmstead:
The board has a fund derived from license fees. This board has enough money, but many boards do not have enough licensees to have a big enough coffer to conduct disciplinary hearings. We do not make a profit on hearing fees; we merely recoup the cost of the hearing itself.
Senator Neal:
If the licensee prevails in the hearing, does he have to pay for the hearing?
Mr. Olmstead:
No. If no discipline is imposed, costs are not recovered. In the case referred to by Mr. Levine, I respectfully disagree with his interpretation of “prevailing.” In the Babyak case, we reached a mutual settlement and did not recoup any costs.
Vice Chairman Hardy:
Mr. Levine, this issue will be brought up again in the context of S.B. 364. You might want to be part of that discussion as well.
Mr. Levine:
I will.
Vice Chairman Hardy:
Could you explain why the changes in section 6 were required?
Mr. Olmstead:
This is a clarification of the confidentiality rules. The language in S.B. 364 is broader. When we read the statute, it was not clear to us exactly what was confidential and what was public record. We wanted to make it clear at what point in a disciplinary proceeding the record becomes a public document.
Vice Chairman Hardy:
The language seems to narrow the scope. Were you dealing with a specific problem?
Mr. Olmstead:
No.
Senator O'Connell:
The letter from Mr. Levine says:
The Board … has a long-standing practice of refusing to provide the veterinarian under investigation the statutory Statement of Findings required under NRS 638.1429. The Board should not be permitted to consider a secret Statement of Findings and fail to release this information to the veterinarian under investigation unless the veterinarian consents to public disclosure.
When you discipline a licensee, do you share that information with the person under investigation?
Mr. Olmstead:
When a consumer complaint is filed with the board, the investigation is assigned to an investigating board member and investigator. Upon completion of the investigation, the investigating board member writes his findings, and that is also confidential.
Senator O'Connell:
So the doctor does not know he is being investigated.
Mr. Olmstead:
Yes. A letter goes out to the doctor as soon as a complaint is received detailing the nature of the complaint. The document Mr. Levine wants to see is the investigating board member’s report. These are confidential and are disclosed to the board in a confidential, closed hearing without disclosing the name of the veterinarian under investigation. The veterinarian and the consumer may appear and make statements to the board at this hearing. After that hearing, the board decides whether to file a formal complaint.
Senator Neal:
If discipline is based on the report, would it not be necessary for the licensee to know the basis of the complaint?
Mr. Olmstead:
If the case goes to a formal hearing, everything else is released. The investigating board member’s report is a work product of the board member and is not released.
Senator Neal:
But the board makes its decision based on that one report. If it is going to impact that doctor’s livelihood, surely he should have access to it so he can defend himself.
Mr. Olmstead:
Yes, he should have all the facts necessary to defend himself. I cannot imagine a scenario in which false facts would be presented. The veterinarian has the right to attend the closed hearing, and all the medical records are available to him. It is the investigating board member’s impressions that are confidential. If the case is not pursued, the report and the complaint together do not officially exist. If the case goes to a disciplinary hearing, the investigating board member’s report means nothing; it is not evidence and is never seen again.
Senator Neal:
If the report is not an advantage to the board and not a disadvantage to the defendant, it seems worthless to me. Are your board members absolved from liability in the case of filing false charges?
Mr. Olmstead:
Yes. When they are acting within the scope of their duties, they are State employees and as such have quasi-judicial immunity from civil actions against them.
Vice Chairman Hardy:
If a false complaint is made, does the veterinarian have the ability to access that information?
Debbie Machen, Executive Director, Nevada State Board of Veterinary Medical Examiners:
When a consumer complaint is filed, the veterinarian receives a copy of the complaint. Once the investigation is completed, the board meets in closed session to discuss the merit of the complaint. The veterinarian is invited to this session. The minutes of the closed session are available to him.
Mr. Levine:
The report made by the investigating board member is not merely a work product. It is a statutory statement of findings used by the board to decide whether to pursue disciplinary action or not. The veterinarian may attend the probable cause hearing to defend himself, but he may not see the document on which the decision is based. I have not heard the board articulate a legitimate State interest in doing this.
Vice Chairman Hardy:
We will set that issue aside for now and continue with the remainder of the bill.
Senator Carlton:
What is the purpose of the changes in section 2 in which you change the definition of a veterinary technician?
Mr. Olmstead:
This is a clarification only. Because the word “licensed” was left out of one of the statutes, it could be interpreted as allowing unlicensed veterinary technicians.
Senator Carlton:
Will this change put anyone out of work?
Ms. Machen:
No. Veterinary technicians have been required to be licensed for the last 13 years. They must undergo formal education and attain a degree.
Senator Carlton:
Where do veterinary assistants fit into this? Are they licensed?
Ms. Machen:
There is nothing in our practice act regarding veterinary assistants. There are only two licensure categories: veterinaries and veterinary technicians. We are currently writing regulations for licensed veterinary assistants, but unlicensed veterinary assistants will still exist.
Vice Chairman Hardy:
Why did you make the changes in section 4 regarding a quorum of the board?
Ms. Machen:
The Legislative Counsel Bureau added that language.
Vice Chairman Hardy:
Why did you make the changes in section 15 regarding “actual injury”?
Mr. Olmstead:
It has been argued that since only two situations, deceptive or unethical professional conduct, do not require proof of actual injury to an animal, all other injuries do require proof of actual injury. This would mean if a veterinarian injures an animal and the animal recovers, there is no proof of injury and the veterinarian cannot be disciplined. This was not the intended interpretation of the statute.
Vice Chairman Hardy:
This makes it clear that the animal does not have to die for you to take disciplinary action, correct?
Mr. Olmstead:
Correct.
Senator O'Connell:
But there does have to be proof that the doctor’s conduct caused harm to the animal, correct?
Mr. Olmstead:
The phrase “proof of actual injury” was being interpreted to mean if the animal got better, no discipline could be imposed regardless of the harm done to the animal. Veterinarians can be disciplined for negligence, incompetence, poor communications with owners, bad record-keeping, and other violations that do not necessarily involve harm to an animal.
Senator O'Connell:
I understand, but I do not necessarily agree with the change.
Senator Neal:
It seems to me you need some type of physical proof to determine if an animal has been mistreated.
Mr. Levine:
A better solution to this misinterpretation would be to include record-keeping and similar violations with the exceptions to this standard. The statute does not require proof of death, merely proof of injury. This statute arose out of the Babyak and Gilman cases in which the doctors were disciplined for the death of animals that died of unknown causes. There was no proof in either case that the doctor’s actions resulted in the animal’s death. Removing this requirement allows the board to impose discipline in cases where no connection can be made between the doctor’s actions and the harm. This is bad public policy and contrary to jurisprudence. Proximate causation is an essential element of negligence under the law.
Gary Ailes, D.V.M., President, Nevada State Board of Veterinary Medical Examiners:
In the Babyak and Gilman cases, we do not know the cause of death because the doctors did not perform necropsies. When the cause of death is not known, we make our judgment based on the acts that brought it up. There was a case 25 years ago in which a veterinarian would put a nail on the x-ray plate, put a dog on top of it, take an x-ray, and tell the owner the dog needed surgery to remove a nail from his stomach. This action resulted in no harm to the animal but was unethical in the extreme and resulted in the doctor losing his license. The only purpose of this bill is to make the practice of veterinary medicine better. Any clarification of language you can provide to this end is greatly appreciated.
Senator Shaffer:
If a jockey whips a horse and it dies, is the veterinarian who cares for the horse responsible?
Mr. Ailes:
No. I do not see how whipping a horse would have anything to do with it dying. It might fall under the animal cruelty act. There is no practice of medicine in this situation.
Vice Chairman Hardy:
I would like you to get together and find a better way to address this issue.
Beverly Willard, Nevada State Board of Veterinary Medical Examiners:
My role on the board is to make sure the animals are being taken care of properly and harm is not coming to them. The board members are diligent, honest, concerned, and compassionate. Everything they do is for the benefit of the animal. I did not want you to be left with the impression that the current board consists of a bunch of “good old boys” sitting around a table playing power games.
Senator O'Connell:
Our role is to determine how the law is going to be interpreted regardless of who is on the board at the moment.
Fred L. Hillerby, Lobbyist, Nevada Veterinary Medical Association, and Nevada State Board of Pharmacy:
The Nevada Veterinary Medical Association looked at this bill as veterinarians and is in support of it.
Mr. Levine:
I am also concerned about the bill’s repealing of the statute regarding standard of proof.
Vice Chairman Hardy:
This should be raised at the discussion on S.B. 364 as well. If it is not viewed as part of the larger issue of that bill, it will be worked out at a work session or subcommittee on S.B. 427.
Mr. Levine:
I would like to request that the letter I sent (Exhibit D), the court decision in the Babyak case (Exhibit E), and examples of costs being imposed (Exhibit F) be made part of the record.
Vice Chairman Hardy:
We will close the hearing on S.B. 427 and open the hearing on S.B. 425.
SENATE BILL 425: Makes various changes relating to pharmacy. (BDR 54-530)
Keith W. Macdonald, Executive Secretary, State Board of Pharmacy:
This bill has 50 sections, of which 24 are fairly substantive. Sections 8, 9, 10, 12, 15, 17, 18, 19, 21, 22, 24, 25, 29, 30, 31, 32, 33, 34, and 37 are changes by the LCB to standardize the term for the board secretary. Sections 42 and 49 harmonize the pharmacy statutes in NRS 639 with insurance sections relating to the substitution of drugs. This language will have to be reconciled with the language in S.B. 387.
SENATE BILL 387: Revises provisions relating to drugs and prescriptions. (BDR 54-656)
Mr. Hillerby:
That bill will be heard in this committee tomorrow.
Mr. Macdonald:
Sections 2, 3, and 4 define pharmaceutical technician and pharmaceutical technician in training. Section 7 defines supportive personnel. There are many people who do support work in a pharmacy, such as completing insurance forms and entering information into a computer. We were attempting to include all those who work in pharmacies for security reasons.
Vice Chairman Hardy:
Was this language taken from some national model legislation?
Mr. Macdonald:
Yes. It was taken from the national Pharmaceutical Technician Certification Board. Section 5 adds handling and storing prescriptions to the definition of “practice of pharmacy.” Subsection 8 of this section allows the pharmacist to order lab tests under the direction of a physician. This is a standard of practice that has been occurring for a number of years.
Vice Chairman Hardy:
Could you give a real-world application of this?
Julie Larsen, Pharmacist Supervisor, Washoe Medical Center Pharmacy:
There are a number of medications for which the margin for error between effectiveness and toxicity is very narrow. The pharmacy and therapeutics committees at hospitals can approve protocols to allow a physician to write a prescription, for example, for “aminoglycosides per pharmacy protocol.” This allows the pharmacist to order lab tests and administer the medication in the correct dosage based on the results of those tests. This lowers the patient’s costs and gives better results from medications because the pharmacist can monitor results much more closely than the physician.
Mr. Hillerby:
This would only apply in a pharmacy in a hospital setting where protocols developed by physicians allow pharmacists more involvement in patient care than they normally have.
Senator Carlton:
How do you define “licensed medical facility”? There are doctors’ offices located next door to a pharmacy and a lab. Would they be included in this?
Mr. Hillerby:
We use the definition in NRS 449.0151. It would not include a doctor’s office.
Mr. Macdonald:
Section 7 allows the board to register all persons who work in a pharmacy. This would allow us to track persons dismissed for drug theft and other matters so they could not then be hired at another pharmacy without their history being known. Section 20 sets the registration fee for supportive personnel at $20, though we may not charge any fee. The fee for pharmaceutical wholesaler is raised to $500.
Vice Chairman Hardy:
Section 7 makes a substantive change in the definition of “supportive personnel.” Do we want the language to be this broad?
Mr. Macdonald:
We wanted to include everyone who works in a pharmacy. There are further constraints as to the duties of supportive personnel elsewhere in the bill.
Mary Lau, Lobbyist, Retail Association of Nevada:
In the past the term was used to include pharmaceutical technicians and pharmaceutical technicians in training. They are no longer part of this definition, which now includes clerks and other personnel. I am not sure this provision achieves the board’s intent, which was to allow them to keep track of everyone who works behind the walls at a pharmacy.
Vice Chairman Hardy:
My concern is that “supportive personnel” can now do things requiring the judgment of a pharmacist.
Mr. Macdonald:
Sections 13 and 16 differentiate pharmaceutical technician and pharmaceutical technician in training from other supportive personnel.
Mr. Hillerby:
Section 16, subsection 3, paragraph (c), specifically delineates the services a pharmaceutical technician may perform.
Vice Chairman Hardy:
But it does not say “supportive personnel” may not do those same things. It may be understood, but it is not laid out in statute anywhere.
Mr. Hillerby:
We are willing to work on this.
Ms. Lau:
I wanted to go on record, and I know they’re going to be working on this bill further, that we object to lines 9 and 10 on page 8, regarding the ratio of supportive personnel to pharmacists for each category of pharmacy.
Mr. Macdonald:
That language was included because a pharmacist must control the drugs and the pharmacy. If he has 50 or more supportive personnel, we have a concern about his ability to maintain security.
Section 11 opens the door to pharmacists graduating from schools accredited by the Canadian Council for Accreditation of Pharmacy programs. This will help reduce the shortage of pharmacists in Nevada. Section 23 clarifies the language allowing a business to be designated as a pharmacy. Section 26, subsection 3, lays out data used to verify an out-of-state prescription for a controlled substance. This is intended to deal with Internet and Web-based pharmacies. We closed a pharmacy in December 2002 that distributed 54,000 prescriptions for controlled substances before we could put them out of business.
Section 27 gives local law authority access to prescription information under certain conditions. Section 28 allows these same officers to remove prescription records if required. Section 35 simplifies and quickens the process by which a respondent requests a rehearing by the board.
Sections 38 and 39 address the generic substitution bill and must be reconciled with S.B. 387. Nearly 85 to 90 percent of prescriptions are prepaid by third‑party payers. For this reason, most patients are not interested in the price of the medication. Those paying cash for prescriptions are more likely to be interested in cheaper alternatives.
Section 40 requires physicians registered with the board who dispense controlled substances to provide this information to the Controlled Substance Abuse Prevention Task Force. The board has operated this task force in participation with two other State agencies for approximately 6 years. We would like to gather this information from physicians as well as pharmacists.
Section 41 provides prescribers of Schedule II controlled substances to include instructions authorizing when the prescription may be filled. Insurance provisions limit most prescriptions to 30 days, but Schedule II prescriptions must be filled within 14 days and can only be filled once. This provision would allow physicians to write on a prescription, “Do not dispense before June 30,” for example. This would be beneficial to patients requiring pain management, among others, by allowing practitioners to give them access to the medication they need without allowing them to be filled in quantities that might be misused.
The bill repeals four sections of NRS. Nevada Revised Statutes section 639.133 grandfathered in pharmacists without college degrees. This bill repeals that, since most covered by this provision would now be over 80 years of age. This does not affect anyone who is currently licensed.
Senator Neal:
This section also applies to people coming from out of the State with college degrees. Are you amending that?
Mr. Macdonald:
It was not our intention to repeal anything that allows pharmacists to reciprocate to the State. Nevada Revised Statutes section 639.133 only applies to pharmacists who do not have a college education. Nevada Revised Statutes section 639.134 allows all pharmacists to reciprocate.
Nevada Revised Statutes section 639.205 allows pharmacists to make their license inactive for a time. This was mostly used by licensees to avoid the continuing education requirement. This bill repeals the section. A pharmacist who does not wish to practice may let his license lapse for up to 5 years, then reinstate by paying back fees and completing required continuing education.
Vice Chairman Hardy:
What section of statute allows that?
Mr. Macdonald:
Nevada Revised Statutes section 639.190.
Senator Neal:
Once you repeal this section, how will you reinstate pharmacists who are currently inactive?
Mr. Macdonald:
We will treat it as if the license had lapsed.
Nevada Revised Statutes section 639.2323 required nuclear pharmacies to have specific publications on hand. This bill repeals this section, as it is of no benefit whatsoever.
Senator Neal:
Are you also repealing any Nevada Administrative Code (NAC) sections dealing with this?
Mr. Macdonald:
Yes. Safety requirements will be built into regulation rather than having them in statute because these requirements change.
Nevada Revised Statutes section 639.2599 requires pharmacies to display a notice informing consumers of the right to ask for less expensive alternatives. Senate Bill 387 will likely change the wording of the sign.
Senator O'Connell:
Are there not differences in quality with some generics? Does the pharmacist explain this to the consumer?
Mr. Macdonald:
The U.S. Food and Drug Administration determines whether drugs are therapeutic equivalents. If the pharmacist knows of differences in other qualities of the drug, such as dissolution rates, he will often call the physician to inform him.
Ms. Lau:
I understand we will be working on this bill. Mr. Macdonald said they wanted a $20 cap on registration for supportive personnel. However, on page 10, line 21, it lists this cap at $50. This is probably an oversight.
Helen A. Foley, Lobbyist, Association of Nevada Pharmaceutical Wholesalers:
We have an amendment to offer (Exhibit G). Nevada Administrative Code section 639.5975 states, “In any calendar month, a wholesaler shall not sell distribute, transfer or otherwise provide more than 10 percent of its total amount of prescription drugs to another wholesaler, distributor or manufacturer” (Exhibit H). Our amendment seeks to change this to allow distribution centers to be set up. We can discuss this in subcommittee.
Mr. Hillerby:
We do not agree with that amendment. Neither Mr. Macdonald nor our legal counsel may speak on this amendment. There is a case pending in federal court and they are under court order not to comment.
Senator Carlton:
Is this the methamphetamine amendment?
Mr. Hillerby:
Not to my understanding. It is broader than that. We will get information to you.
Steven A. Gibson, Attorney, Association of Nevada Pharmaceutical Wholesalers:
I instituted the complaint which resulted in the temporary restraining order. This order was changed so there is no prohibition on investigation, revelation of investigation, or any public policy debate. They are constrained from saying anything that is false. We invite and welcome open policy debate on these issues.
Stephen D. Quinn, Deputy Attorney General, State Board of Pharmacy:
Mr. Macdonald and Mr. Ling cannot disclose derogatory information about four pharmaceutical wholesalers represented by Mr. Gibson. Our feeling is the discussion of the motives behind the amendment could lead to questions of the operations of wholesalers, including the companies at question.
Senator Neal:
What is the benefit to the public of this 10 percent restriction?
Louis Ling, General Counsel, State Board of Pharmacy:
Nevada has 442 licensed pharmaceutical wholesalers. Of these, 40 are located in Nevada, and three of these are represented by Mr. Gibson. They are involved in the alternative source or secondary source market. Most drugs move from the manufacturer to the major wholesalers and then to neighborhood pharmacies. The secondary source market illegally acquires drugs at a large discount from closed-door pharmacies such as nursing homes. They then resell them to other wholesalers over and over, at a small profit with each sale, until the drugs are finally sold to neighborhood pharmacies. We have seen drugs originate in Florida and be sold through Arizona, Nevada, Kentucky, Illinois, and New York before being sold to consumers. This 10 percent rule was written to try to rein in the secondary source wholesalers. The major wholesalers have no objection to this rule. This practice of the secondary wholesalers is a violation of contract and a fraud and has been prosecuted across the country.
Vice Chairman Hardy:
Is there any public concern about this practice, other than the increase in price?
Mr. Ling:
This market as a whole has come under scrutiny because it facilitates the distribution of counterfeit products. I have a magazine article about this problem (Exhibit I) and a report from Florida’s attorney general (Exhibit J. Original is on file in the Research Library.). All counterfeit medications that reach the neighborhood pharmacy get there via the secondary source market.
Vice Chairman Hardy:
What are counterfeit drugs? How do they differ from generic drugs?
Mr. Ling:
Counterfeit drugs are inert ingredients packaged and sold as prescription medications. For example, a counterfeiter might buy the same glass vials as the manufacturer uses, fill them with saline solution, put on an identical label, and sell them as the genuine article. They are then sold by the secondary source wholesalers and move into the national drug supply. One of the first that was discovered was Serostim, a medication used in the treatment of AIDS.
Vice Chairman Hardy:
So they have no medicinal effect?
Mr. Ling:
They can be placebos, diluted drugs, or worse. In some instances they are other medications that can be harmful. In any case, they are manufactured in unsanitary conditions. The federal law was supposed to set up a system to track drugs from manufacturer to patient. The federal law has never been fully implemented. Nevada did implement some of these controls in 1992 through the NAC sections we are reviewing. The path a drug takes from manufacturer to consumer is called its pedigree. In every case we have prosecuted, there has been a deliberate attempt to obscure the drugs’ pedigrees so we cannot track them to their source. This is the main function of the secondary source market, which is why the board is determined to stop this kind of trade.
Vice Chairman Hardy:
How many times does a drug change hands from wholesaler to wholesaler on average?
Mr. Ling:
We have seen drugs change hands as many as seven or eight times across the country.
Vice Chairman Hardy:
Mr. Gibson, is there a legitimate reason for this?
Mr. Gibson:
I would like to point out that the article provided by Mr. Ling (Exhibit I) says 16,000 pharmaceutical wholesale companies produce a $126 billion industry which is federally regulated. By aggressively discounting drugs, they reduce drug prices at neighborhood pharmacies. There are three major wholesalers in the United States, none of which are in Nevada. I have a handout describing the secondary wholesale market (Exhibit K). Page 3 of this handout shows how the industry flows. The secondary wholesaler provides drugs unavailable from the major wholesaler. Mr. Miller sells a very substantial percentage of his drugs to dispensers and pharmacies. They buy them either because they are less expensive or because they cannot get them from the major wholesalers. The 10 percent rule has never been enforced, and no other state has a comparable regulation.
Vice Chairman Hardy:
Let me ask again. What is the compelling market reason for this practice?
Mr. Gibson:
It increases availability and decreases price. In a free-market economy, an industry need not come before the Legislature and provide a compelling reason for its existence. They are licensed by the board.
Vice Chairman Hardy:
What is the public health reason this is in the statute?
Mr. Gibson:
This is a complicated area of the law. The Nonprofit Institutions Act, which was an amendment to the Robinson-Patman Act of 1936, allows manufacturers to sell on a price-discriminatory basis to not-for-profit entities as long as they sign an “own use” clause. Mr. Ling and Mr. Macdonald believe this market does not need to exist because of the closed-door pharmacy’s breach of contract by reselling the drugs they buy. The result is the industry is controlled by manufacturers and three major wholesalers.
To answer your question, reselling across states may be necessary when the need is not identified at one level. You may have a secondary wholesaler in Nevada with connections in Texas or Missouri where there is a need. The major wholesalers would need to increase their sales force by 16,000 companies to fill all these needs. We believe there is no illegal diversion in this. The 10 percent rule was enacted to put these people out of business.
Vice Chairman Hardy:
How do we guard against counterfeit drugs?
Mr. Gibson:
There are very strong laws against counterfeiting at a federal and state level. We do not want to enact State legislation that adversely affects interstate commerce and interferes with federal laws. This is a very heavily regulated industry. Also, the board already has a very robust ability to conduct investigations of counterfeiting activity. This bill is not necessary to deal with counterfeiting.
Vice Chairman Hardy:
I am also concerned about perishable drugs. We need controls to make sure the product has not been compromised in this way.
Mr. Ling:
The 10 percent rule was part of a larger regulatory package passed in 2001. One effect of the regulations was to require wholesalers to have a physical plant with shelves, drugs, and live staff on hand. This eliminated phony wholesalers who were transferring millions of dollars worth of drugs without any actual plant. Their numbers were cut from 40 to about six in Nevada.
Vice Chairman Hardy:
We want to cut out the phony wholesalers without adversely affecting the legitimate wholesalers.
Mr. Ling:
We agree. We have been negotiating with Mr. Gibson to try to come up with something other than the 10 percent rule to do this. It has not been enforced because we were in good-faith negotiations. We have not been able to reconcile our designs. You are now facing the same dilemma the board faced: finding a way to define legitimate activity while eliminating illegitimate activity. In all of the cases we have prosecuted, we have never seen a drug from one of these secondary wholesalers sold to a pharmacy. Some apparently do.
Vice Chairman Hardy:
Section 26 of the bill defines a bona fide relationship between a patient and a pharmacist. Does this not address this issue in some way?
Mr. Ling:
That provision is intended to address illegal Internet sales in which the doctor never sees the patient.
Vice Chairman Hardy:
The concept might be useful in fighting phony wholesalers.
Mr. Ling:
Phony wholesalers are not a problem at this point. We still have some concerns about the way the second source market operates.
Mr. Gibson:
The board has been very effective in eliminating the troubled sector of this industry. What remains is consonant with federal law. With the right impetus, Mr. Ling and I could potentially come to a compromise on this matter.
Senator Neal:
This is a classic middleman situation. I am always skeptical of the middleman. Anything the board has done to curtail that activity seems correct to me.
Vice Chairman Hardy:
There being no further business, the meeting is adjourned at 10:14 a.m.
RESPECTFULLY SUBMITTED:
Lynn Hendricks,
Committee Secretary
APPROVED BY:
Senator Warren B. Hardy II, Vice Chairman
DATE: