Inter-Departmental Correspondence

Health System



March 17, 2010


April 13, 2010







Honorable Board of Supervisors



Jean S. Fraser, Chief, Health System


Nomalee Tilman, Director, Correctional Health Services



Second Amendment to the Agreement with Diamond Pharmacy Services



Adopt a Resolution:


Authorizing the President of the Board to execute a Second Amendment to the Agreement with Diamond Pharmacy Services for pharmaceutical services to enable 340B pricing with no change in the maximum obligation or term; and



Authorizing the Chief of the Health System or designee to execute contract amendments which modify the County's maximum fiscal obligation by no more than $25,000 (in aggregate), and/or modify the contract term and/or services so long as the modified term or services is/are within the current or revised fiscal provisions.



Correctional Health Services has contracted with Diamond Pharmacy Services (Diamond) to provide professional comprehensive pharmaceutical services since December 2001. In March 2005 Correctional Health Services conducted a Request for Proposals (RFP) for the provision of pharmaceutical services. Diamond was selected to continue to provide these services, and has provided excellent pharmaceutical services at very competitive prices. On June 28, 2005, your Board approved an Agreement with Diamond for $2,713,000 for a three-year term from July 1, 2005 through June 30, 2008. On May 20, 2008, your Board approved an Amendment to the Agreement with Diamond to extend the term from July 1, 2005 through June 30, 2010, and increase the contract funding by $1,647,333. As the Diamond contract expires this June, a RFP for pharmaceutical services is currently underway, with a contract with the selected vendor to be in place by July 1, 2010.



This Second Amendment ensures that Correctional Health Services can receive 340B drug pricing as administered by Diamond. The 340B Drug Pricing Program resulted from enactment of Public Law 102-585, the Veterans Health Care Act of 1992, which is codified as Section 340B of the Public Health Service Act. Section 340B limits the cost of covered outpatient drugs to certain federal grantees, federally-qualified health center look-alikes and qualified disproportionate share hospitals. Significant savings on pharmaceuticals may be seen by those entities that participate in this program.


Due to a recent Federal Register Notice allowing 340B covered entities to contract with more than one pharmacy to provide patient drugs purchased at 340B prices, Correctional Health Services may now participate in the 340B program under the covered entity of the San Mateo Medical Center as of April 5, 2010. The Second Amendment allows Diamond to dispense drugs from the 340B formulary list to Correctional Health Services at a significant price discount, retroactive to April 5th.


The contractor has assured compliance with the County's Contractor Employee Jury Service Ordinance, as well as all other contract provisions that are required by County ordinance and administrative memoranda, including but not limited to insurance, hold harmless, non-discrimination and equal benefits.


County Counsel has reviewed and approved the Resolution and Amendment as to form.


The Amendment to the Agreement contributes to the Shared Vision 2025 outcome of a Healthy Community by ensuring excellent pharmaceutical services are available for inmates and juveniles at County correctional facilities at the most competitive prices. It is anticipated that there will be a slight decrease in the utilization of medications by the mentally ill in FY 2009-10 as a multi-dimensional approach to the treatment of mental illness and co-occurring disorders is pursued, focusing on teaching skills that will improve functional abilities.


Performance Measure:


FY 2008-09

FY 2009-10

Number and percent of mentally ill inmates engaging in treatment by receiving medications





The term of the Agreement and the maximum contract amount remain the same. It is anticipated that Correctional Health Services will see a reduction in overall drug prices of approximately $170,000 per year. There is no change to Net County Cost as a result of this Amendment.