New Limitations on Chain Pharmacy Quotas in California

Retail chain pharmacies should be aware of California’s recent passage of SB 362, signed into law by Governor Gavin Newson late last month, and the potential impact of the law on how chains evaluate their pharmacy staff and track individual productivity. At a high level, the law bars using “quota” metrics that track the number of times individual pharmacists and pharmacy technicians perform tasks or provide services while on duty. These quota systems have historically been used by various national retail pharmacy chains to track staff productivity and inform business operations. The bill cites various rationales for instituting quota prohibitions, including “overwhelming workloads” for pharmacists expected to meet certain fixed quotas and the associated negative impact on patient care. Of note, the bill noted that the Board of Pharmacy lacks the ability to determine whether to discipline non-compliant individual licensees or penalize pharmacies for created work environments that “leave little choice but noncompliance.”

The new law updates the California Business and Professions Code by adding two new Sections-- 4113.7 and 4317. Section 4113.7 prohibits chain community pharmacies from establishing, utilizing, or communicating a quota. A “quota” is defined as a “fixed number or formula related to the duties for which a pharmacist or pharmacy technician license is required, against which the chain community pharmacy or its agent measures or evaluates the number of times either an individual pharmacist or pharmacy technician performs tasks or provides services while on duty related to any of the following:

• Prescriptions filled;
• Services rendered to patients;
• Programs offered to patients; and
• Revenue obtained.”

CA BUS & PROF § 4113.7(c)(1)(A-D).

Section 4317 grants the California Board of Pharmacy authority to take enforcement action against a violating pharmacy unless the pharmacy can show clear and convincing evidence that the quotas were used contrary to its policy.

Importantly, there are certain limiting factors to this quota prohibition. First, the restrictions only apply to “chain community pharmacies,” defined by California as “a chain of 75 or more stores in California under the same ownership.” CA BUS & PROF § 4001(c). Second, the following are not considered “quotas” and are therefore still permissible activities for applicable pharmacies:

• Revenue measurements for a particular pharmacy that are not calculated or measured by tasks performed/services provided by individual pharmacy staff;
• Evaluations of pharmacy staff competence, performance, or quality of care provided to patients so long as quotas are not used;
• Any performance metric required by state or federal regulators that does not use quotas; and
• Pharmacy policy and procedures that assist with assessing pharmacy staff competency and performance so long as quotas are not used.

CA BUS & PROF § 4113.7(c)(2)—(d).

In sum, large pharmacy chains may need to evaluate changes to their tracking and evaluation process for California-based pharmacy staff. However, it is important to note that SB 362 still gives California chain pharmacies room to evaluate employees and quantify productivity so long as the evaluation procedure falls in line with the delineated exceptions. Additionally, the law appears to only bar quotas used for individual pharmacy staff, meaning that pharmacy chains could arguably still use quota-type metrics to track performance on a pharmacy or entity level.

For more information about how California’s new quota prohibitions may affect your business, please contact your Quarles & Brady attorney or:

• Simone Colgan Dunlap: (602) 229-5510 / simone.colgandunlap@quarles.com
• Michael French: (312) 715-5261 / michael.french@quarles.com
• Luis Lanz: (602) 229-5331 / luis.lanz@quarles.com
• Nicholas Meza: (602) 229-5439 / nicholas.meza@quarles.com