BILL NUMBER: AB 1298 CHAPTERED 09/24/04 CHAPTER 750 FILED WITH SECRETARY OF STATE SEPTEMBER 24, 2004 APPROVED BY GOVERNOR SEPTEMBER 24, 2004 PASSED THE ASSEMBLY AUGUST 24, 2004 PASSED THE SENATE AUGUST 17, 2004 AMENDED IN SENATE AUGUST 12, 2004 AMENDED IN SENATE JULY 22, 2004 AMENDED IN SENATE JUNE 24, 2004 AMENDED IN SENATE JUNE 22, 2004 AMENDED IN SENATE JUNE 17, 2004 AMENDED IN ASSEMBLY APRIL 30, 2003 INTRODUCED BY Assembly Member Hancock FEBRUARY 21, 2003 An act to amend Sections 6276.08 and 6276.22 of the Government Code, and to amend Sections 123853 and 125191 of the Health and Safety Code, relating to genetic diseases, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 1298, Hancock. Genetically Handicapped Person's Program: California Children's Services Program: contracts: confidentiality. Existing law authorizes the State Department of Health Services to enter into contracts with one or more manufacturers on a negotiated or bid basis as the purchaser, but not the dispenser or distributor, of factor replacement therapies under the Genetically Handicapped Person's Program and the California Children's Services Program for the purpose of enabling the department to obtain the full range of available therapies and services required for clients with hematological disorders at the most favorable price and to enable the department to obtain discounts, rebates, or refunds from the manufacturers based upon the large quantities purchased under the program. Existing law, the California Public Records Act, provides that, except for exempt records, every state or local agency, upon request, shall make records available to any person upon payment of fees to cover costs. This bill would require that contracts entered into with manufacturers of factor replacement therapies pursuant to the above programs be confidential and exempt from disclosure under the California Public Records Act. Under existing law, the State Department of Health Services administers the Medi-Cal program, and is authorized, among other things, to enter into contracts with certain drug manufacturers. Under existing law, the department is entitled to drug rebates in accordance with certain conditions, and drug manufacturers are required to calculate and pay interest on late or unpaid rebates. This bill would impose similar requirements for the calculation and payment of interest on late or unpaid rebates from factor replacement therapy manufacturers under the Genetically Handicapped Person's Program and the California Children's Services Program. This bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 6276.08 of the Government Code is amended to read: 6276.08. Cable television subscriber information, confidentiality of, Section 637.5, Penal Code. California AIDS Program, personal data, confidentiality, Section 120820, Health and Safety Code. California Apple Commission, confidentiality of lists of persons, Section 75598, Food and Agricultural Code. California Apple Commission, confidentiality of proprietary information from producers or handlers, Section 75633, Food and Agricultural Code. California Asparagus Commission, confidentiality of lists of producers, Section 78262, Food and Agricultural Code. California Asparagus Commission, confidentiality of proprietary information from producers, Section 78288, Food and Agricultural Code. California Avocado Commission, confidentiality of information from handlers, Section 67094, Food and Agricultural Code. California Avocado Commission, confidentiality of proprietary information from handlers, Section 67104, Food and Agricultural Code. California Cherry Commission, confidentiality of proprietary information from producers, processors, shippers, or grower-handlers, Section 76144, Food and Agricultural Code. California Children's Services Program, confidentiality of factor replacement therapy contracts, Section 123853, Health and Safety Code. California Cut Flower Commission, confidentiality of lists of producers, Section 77963, Food and Agricultural Code. California Cut Flower Commission, confidentiality of proprietary information from producers, Section 77988, Food and Agricultural Code. California Date Commission, confidentiality of proprietary information from producers and grower-handlers, Section 77843, Food and Agricultural Code. California Egg Commission, confidentiality of proprietary information from handlers or distributors, Section 75134, Food and Agricultural Code. California Forest Products Commission, confidentiality of lists of persons, Section 77589, Food and Agricultural Code. California Forest Products Commission, confidentiality of proprietary information from producers, Section 77624, Food and Agricultural Code. California Iceberg Lettuce Commission, confidentiality of information from handlers, Section 66624, Food and Agricultural Code. California Kiwifruit Commission, confidentiality of proprietary information from producers or handlers, Section 68104, Food and Agricultural Code. California Navel Orange Commission, confidentiality of proprietary information from producers or handlers and lists of producers and handlers, Section 73257, Food and Agricultural Code. California Pepper Commission, confidentiality of lists of producers and handlers, Section 77298, Food and Agricultural Code. California Pepper Commission, confidentiality of proprietary information from producers or handlers, Section 77334, Food and Agricultural Code. California Pistachio Commission, confidentiality of proprietary information from producers or processors, Section 69045, Food and Agricultural Code. California Salmon Commission, confidentiality of fee transactions records, Section 76901.5, Food and Agricultural Code. California Salmon Commission, confidentiality of request for list of commercial salmon vessel operators, Section 76950, Food and Agricultural Code. California Seafood Council, confidentiality of fee transaction records, Section 78553, Food and Agricultural Code. California Seafood Council, confidentiality of information on volume of fish landed, Section 78575, Food and Agricultural Code. California Sheep Commission, confidentiality of proprietary information from producers or handlers and lists of producers, Section 76343, Food and Agricultural Code. California State University contract law, bids, questionnaires and financial statements, Section 10763, Public Contract Code. California Table Grape Commission, confidentiality of information from shippers, Section 65603, Food and Agricultural Code. California Tomato Commission, confidentiality of lists of producers, handlers, and others, Section 78679, Food and Agricultural Code. California Tomato Commission, confidentiality of proprietary information, Section 78704, Food and Agricultural Code. California Walnut Commission, confidentiality of lists of producers, Section 77101, Food and Agricultural Code. California Walnut Commission, confidentiality of proprietary information from producers or handlers, Section 77154, Food and Agricultural Code. California Wheat Commission, confidentiality of proprietary information from handlers and lists of producers, Section 72104, Food and Agricultural Code. California Wheat Commission, confidentiality of requests for assessment refund, Section 72109, Food and Agricultural Code. California Wine Commission, confidentiality of proprietary information from producers or vintners, Section 74655, Food and Agricultural Code. California Wine Grape Commission, confidentiality of proprietary information from producers and vintners, Section 74955, Food and Agricultural Code. SEC. 2. Section 6276.22 of the Government Code is amended to read: 6276.22. Genetic test results in medical record of applicant or enrollee of specified insurance plans, Sections 10123.35 and 10140.1, Insurance Code. Genetically Handicapped Person's Program, confidentiality of factor replacement therapy contracts, Section 125191, Health and Safety Code. Governor, correspondence of and to Governor and Governor's office, subdivision (l), Section 6254, Government Code. Governor, transfer of public records in control of, restrictions on public access, Section 6268, Government Code. Grand juror, disclosure of information or indictment, Section 924, Penal Code. Grand jury, confidentiality of request for special counsel, Section 936.7, Penal Code. Grand jury, confidentiality of transcription of indictment or accusation, Section 938.1, Penal Code. Group Insurance, public employees, Section 53202.25, Government Code. Guardian, confidentiality of report used to check ability, Section 2342, Probate Code. Guardianship, confidentiality of report regarding the suitability of the proposed guardian, Section 1543, Probate Code. Guardianship, disclosure of report and recommendation concerning proposed guardianship of person or estate, Section 1513, Probate Code. SEC. 3. Section 123853 of the Health and Safety Code is amended to read: 123853. (a) The department may enter into contracts with one or more manufacturers on a negotiated or bid basis as the purchaser, but not the dispenser or distributor, of factor replacement therapies under the California Children's Services Program for the purpose of enabling the department to obtain the full range of available therapies and services required for clients with hematological disorders at the most favorable price and to enable the department, notwithstanding any other provision of state law, to obtain discounts, rebates, or refunds from the manufacturers based upon the large quantities purchased under the program. Nothing in this subdivision shall interfere with the usual and customary distribution practices of factor replacement therapies. In order to achieve maximum cost savings, the Legislature hereby determines that an expedited contract process under this section is necessary. Therefore, a contract under this subdivision may be on a negotiated basis and shall be exempt from Chapter 2 (commencing with Section 10290) of Part 2 of Division 2 of the Public Contract Code and Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of the Government Code. Contracts entered pursuant to this subdivision shall be confidential and shall be exempt from disclosure under the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code). (b) (1) Factor replacement therapy manufacturers shall calculate and pay interest on late or unpaid rebates. The interest shall not apply to any prior period adjustments of unit rebate amounts or department utilization adjustments. Manufacturers shall calculate and pay interest on late or unpaid rebates for quarters that begin on or after the effective date of the act that added this subdivision. (2) Following the final resolution of any dispute regarding the amount of a rebate, any underpayment by a manufacturer shall be paid with interest calculated pursuant to paragraph (4), and any overpayment, together with interest at the rate calculated pursuant to paragraph (4), shall be credited by the department against future rebates due. (3) Interest pursuant to paragraphs (1) and (2) shall begin accruing 38 calendar days from the date of mailing the invoice, including supporting utilization data sent to the manufacturer. Interest shall continue to accrue until the date of mailing of the manufacturer's payment. (4) Interest rates and calculations pursuant to paragraphs (1) and (2) shall be identical to interest rates and calculations set forth in the federal Centers for Medicare and Medicaid Services' Medicaid Drug Rebate Program Releases or regulations. (b) If the department has not received a rebate payment, including interest, within 180 days of the date of mailing of the invoice, including supporting utilization data, a factor replacement therapy manufacturer's contract with the department shall be deemed to be in default and the contract may be terminated in accordance with the terms of the contract. This subdivision does not limit the department's right to otherwise terminate a contract in accordance with the terms of that contract. (c) The department may enter into contracts on a bid or negotiated basis with manufacturers, distributors, dispensers, or suppliers of pharmaceuticals, appliances, durable medical equipment, medical supplies, and other product-type health care services and laboratories for the purpose of obtaining the most favorable prices to the state and to assure adequate access and quality of the product or service. In order to achieve maximum cost savings, the Legislature hereby determines that an expedited contract process under this subdivision is necessary. Therefore, contracts under this subdivision may be on a negotiated basis and shall be exempt from the provisions of Chapter 2 (commencing with Section 10290) of Part 2 of Division 2 of the Public Contract Code and Chapter 6 (commencing with Section 14825), Part 5.5, Division 3 of the Government Code. This subdivision shall not apply to pharmacies or suppliers that provide blood, blood derivatives, or blood factor products, or any product or service provided by those pharmacies or suppliers. (d) The department may contract with one or more manufacturers of each multisource prescribed product or supplier of outpatient clinical laboratory services on a bid or negotiated basis. Contracts for outpatient clinical laboratory services shall require that the contractor be a clinical laboratory licensed or certified by the State of California or certified under Section 263a of Title 42 of the United States Code. Nothing in this subdivision shall be construed as prohibiting the department from contracting with less than all manufacturers or clinical laboratories, including just one manufacturer or clinical laboratory, on a bid or negotiated basis. SEC. 4. Section 125191 of the Health and Safety Code is amended to read: 125191. (a) The department may enter into contracts with one or more manufacturers on a negotiated or bid basis as the purchaser, but not the dispenser or distributor, of factor replacement therapies under the Genetically Handicapped Person's Program for the purpose of enabling the department to obtain the full range of available therapies and services required for clients with hematological disorders at the most favorable price and to enable the department, notwithstanding any other provision of state law, to obtain discounts, rebates, or refunds from the manufacturers based upon the large quantities purchased under the program. Nothing in this subdivision shall interfere with the usual and customary distribution practices of factor replacement therapies. In order to achieve maximum cost savings, the Legislature hereby determines that an expedited contract process under this section is necessary. Therefore, a contract under this subdivision may be entered into on a negotiated basis and shall be exempt from Chapter 2 (commencing with Section 10290) of Part 2 of Division 2 of the Public Contract Code and Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of the Government Code. Contracts entered pursuant to this subdivision shall be confidential and shall be exempt from disclosure under the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code). (b) (1) Factor replacement therapy manufacturers shall calculate and pay interest on late or unpaid rebates. The interest shall not apply to any prior period adjustments of unit rebate amounts or department utilization adjustments. Manufacturers shall calculate and pay interest on late or unpaid rebates for quarters that begin on or after the effective date of the act that added this subdivision. (2) Following the final resolution of any dispute regarding the amount of a rebate, any underpayment by a manufacturer shall be paid with interest calculated pursuant to paragraph (4), and any overpayment, together with interest at the rate calculated pursuant to paragraph (4), shall be credited by the department against future rebates due. (3) Interest pursuant to paragraphs (1) and (2) shall begin accruing 38 calendar days from the date of mailing the invoice, including supporting utilization data sent to the manufacturer. Interest shall continue to accrue until the date of mailing of the manufacturer's payment. (4) Interest rates and calculations pursuant to paragraphs (1) and (2) shall be identical to interest rates and calculations set forth in the federal Centers for Medicare and Medicaid Services' Medicaid Drug Rebate Program Releases or regulations. (b) If the department has not received a rebate payment, including interest, within 180 days of the date of mailing of the invoice, including supporting utilization data, a factor replacement therapy manufacturer's contract with the department shall be deemed to be in default and the contract may be terminated in accordance with the terms of the contract. This subdivision does not limit the department's right to otherwise terminate a contract in accordance with the terms of that contract. (c) The department may enter into contracts on a bid or negotiated basis with manufacturers, distributors, dispensers, or suppliers of pharmaceuticals, appliances, durable medical equipment, medical supplies, and other product-type health care services and laboratories for the purpose of obtaining the most favorable prices to the state and to assure adequate access and quality of the product or service. In order to achieve maximum cost savings, the Legislature hereby determines that an expedited contract process under this subdivision is necessary. Therefore, contracts under this subdivision may be entered into on a negotiated basis and shall be exempt from Chapter 2 (commencing with Section 10290) of Part 2 of Division 2 of the Public Contract Code and Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of the Government Code. This subdivision shall not apply to pharmacies or suppliers that provide blood, blood derivatives, or blood factor products, or any product or service provided by those pharmacies or suppliers. (d) The department may contract with one or more manufacturers of each multisource prescribed product or supplier of outpatient clinical laboratory services on a bid or negotiated basis. Contracts for outpatient clinical laboratory services shall require that the contractor be a clinical laboratory licensed or certified by the State of California or certified under Section 263a of Title 42 of the United States Code. Nothing in this subdivision shall be construed as prohibiting the department from contracting with less than all manufacturers or clinical laboratories, including just one manufacturer or clinical laboratory, on a bid or negotiated basis. SEC. 5. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to facilitate contract negotiations for provision of services under the Genetically Handicapped Person's Program, thus allowing the state to realize rebate savings on these contracts at the earliest possible time, it is necessary for this act to take effect immediately.