BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 506 (Hill) - Ephedrine: retail sale.
Amended: As Introduced Policy Vote: PS 7-0, JUD 4-0
Urgency: No Mandate: Yes
Hearing Date: May 23, 2013 Consultant: Jolie Onodera
SUSPENSE FILE.
Bill Summary: SB 506 would repeal existing statutory provisions
for over-the-counter sales of pseudoephedrine and related
products and replace them with new purchase limits consistent
with federal law and require the electronic tracking of
purchases. Specifically, this bill:
Limits the retail sale of pseudoephedrine to 3.6 grams per
transaction and 9 grams in any 30-day period.
On and after July 1, 2014, requires pseudoephedrine retailers
to immediately transmit specified purchase information to the
National Precursor Log Exchange (NPLEx) to determine if the
proposed sale violates purchasing restrictions.
Provides that a violation of either the sales limits or
required procedures for a pseudoephedrine transaction is a
misdemeanor, as specified.
Provides that upon execution of a memorandum of understanding
(MOU) between the Department of Justice (DOJ) and the National
Association of Drug Diversion Investigators (NADDI), NADDI
shall supply NPLEx data to the DOJ on a weekly basis and
provide law enforcement with real-time access to the data.
States neither the DOJ nor any other state agency shall bear
any cost for the development, installation, or maintenance of
the system.
Requires the State Board of Equalization (BOE) to notify
retailers of the reporting requirements by April 1, 2014.
Sunsets these provisions on January 1, 2019.
Fiscal Impact:
Significant cost pressure potentially in excess of $150,000
(General Fund) to the DOJ for oversight and periodic system
audits to the extent an MOU with NADDI is executed.
Minor costs of less than $10,000 (General Fund) for the BOE to
provide notifications to retailers.
Potential ongoing loss of sales tax revenue (General Fund) due
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to reduced taxable sales of pseudoephedrine and related
products. For every ten percent reduction in projected annual
sales, loss of $295,000 in General Fund sales tax revenue.
Non-reimbursable local law enforcement costs offset to a
degree by fine revenue for misdemeanor violations of either
the sales limits or required procedures for pseudoephedrine
transactions.
Background: In 2006, the federal Combat Methamphetamine Epidemic
Act (CMEA) was enacted to restrict the retail sale of ephedrine,
pseudoephedrine, norpseudoephedrine, or phenylpropanolamine.
States have enacted limits on purchases of pseudoephedrine,
imposed point-of-sale restrictions, or enacted pseudoephedrine
tracking laws. Oregon has required a prescription for
pseudoephedrine purchases since 2006. Mississippi has required a
prescription since July 2010.
Of the states that require electronic tracking (an alternative
to requiring a prescription), at least 24 use the National
Precursor Log Exchange (NPLEx), funded by the manufacturers of
pseudoephedrine products to track pseudoephedrine sales. Those
purchase logs are then freely accessible by law enforcement with
no requirement for a warrant.
This bill would add California to that list of states by
requiring retail distributors to send purchase information to
NPLEx for purposes of determining whether a proposed sale would
violate limit requirements.
Proposed Law: See Bill Summary.
Related Legislation: AB 1280 (Hill) 2011 was virtually identical
to this measure. This bill was held on the Suspense File of this
committee.
AB 1455 (Hill) 2010 would have enacted an electronic database
substantially similar to the database proposed in this measure.
AB 1455 was held in the Senate Judiciary Committee due to
privacy concerns.
Staff Comments: This bill would repeal existing statutory
provisions for over-the-counter sales of pseudoephedrine and
other methamphetamine precursor products and replace them with
sales limits consistent with federal law and new procedures to
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record sales transactions. This bill would, on and after July 1,
2014, require retailers to immediately transmit information
regarding the sale of pseudoephedrine and related products to
NPLEx, a privately funded out-of-state electronic monitoring
system administered by NADDI for the purpose of determining
whether the sale would be in violation of established sales
limits. Retailers would be required to store pseudoephedrine
products in a locked cabinet or behind the counter, require
purchasers to present valid photo identification, and record
specified information in NPLEx at the time of the transaction.
This bill states that the requirements are contingent upon the
NPLEx system being available to retailers in the State without a
charge for accessing the system. While the provisions of the
bill indicate the DOJ and authorized law enforcement would not
be charged for use of the system, it is not clear if this
provision is contingent upon an executed MOU with NADDI, as
discussed below. According to the Consumer Healthcare Products
Association (CHPA), "Manufacturers fully fund NPLEx so there is
no charge to retailers, states, or law enforcement." NADDI
currently provides NPLEx at no cost to states, as funding for
the electronic monitoring system comes from the manufacturers of
pseudoephedrine and related products.
This bill states that should the DOJ execute a MOU with NADDI
governing access, NADDI shall forward transaction records in
NPLEx to DOJ on a weekly basis and provide real-time access to
NPLEx information through an online portal to law enforcement in
the State as authorized by the DOJ. The monitoring system's
security program would be required to comply with FBI standards
and could be audited once a year by the DOJ. Further, law
enforcement access to the system would be recorded using a
unique access code for each individual, and each user's history
would be required to be maintained and could be audited by the
DOJ. Staff notes the electronic tracking requirements and
misdemeanor violation provisions would become effective upon
enactment of this measure regardless of an executed MOU between
the DOJ and NADDI.
Although the costs for developing, installing, and maintaining
the system will be supported by NADDI, there would be
substantial cost pressure to the DOJ for oversight to the extent
an MOU is executed. It is unknown to what extent providing
authorization to law enforcement "as authorized by the DOJ" to
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access the database would incur additional workload on the DOJ.
The receipt of weekly transaction data and the authority to
audit each user's access history as well as the monitoring
system's security program would also create significant
additional cost pressure to the DOJ. Appriss, a private company
headquartered in Louisville, Kentucky, would provide the
software and house the service in its data center. Given the
database would not be directly under DOJ oversight but serviced
by an out-of-state company, periodic audits of the effectiveness
and use of the system would most likely be required and could
incur significant costs.
The State Board of Equalization (BOE) would be required to
notify all retailers of the requirement to submit transactions
to NPLEx no later than April 1, 2014. The BOE has indicated
notification to approximately 175,000 retailers would be
completed through a combination of electronic and paper notices,
the majority of which would receive electronic notification. The
BOE estimates costs associated with the provisions of this bill
would be minor and absorbable.
To the extent the provisions of this bill successfully prohibit
sales of pseudoephedrine and related products in excess of the
prescribed amounts could result in lost sales tax revenue of an
unknown amount. Based on estimated annual sales of $75 million,
General Fund sales tax revenue on these products is estimated at
nearly $3 million in 2013 (based on current General Fund
allocation of 3.9375 percent). It is unknown what percentage of
sales would be impacted, but a 10 percent reduction in sales
would result in a tax revenue impact of $295,000.
This bill would provide that a violation of either the sales
limits or required reporting procedures for a pseudoephedrine
transaction is a misdemeanor, punishable on a first conviction
by a fine of up to $1,000, a jail term of up to six months, or
both. Upon a subsequent conviction, the maximum jail term is one
year and the maximum fine is $10,000. By creating a new crime,
this bill would create a state-mandated program and would result
in non-reimbursable local law enforcement costs, offset to a
degree by fine revenue.
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