BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  AB 2779|
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                                 THIRD READING


          Bill No:  AB 2779
          Author:   Solorio (D)
          Amended:  8/11/10 in Senate
          Vote:     27 - Urgency

           
           SENATE LAB. & INDUS. RELATIONS COMMITTEE  :  4-0, 8/10/10
          AYES: DeSaulnier, Ducheny, Leno, Yee
          NO VOTE RECORDED: Wyland, Hollingsworth

           ASSEMBLY FLOOR  :  74-0, 4/29/10 (Consent) - See last page  
            for vote


           SUBJECT :    Workers compensation: compound medication

           SOURCE  :     Author


           DIGEST  :    This bill requires that compounded medications  
          can only be reimbursed through the workers compensation  
          system if they are medically necessary and that the cost of  
          the ingredient does not exceed the Medi-Cal fee schedule.

           ANALYSIS  :    

           Existing law
           
          1. Establishes a workers' compensation system that provides  
             benefits to an employee injured at work, irrespective of  
             fault.  This system requires all employers to secure  
             payment of benefits by either securing the consent of  
             the Department of Industrial Relations to self insure or  
                                                           CONTINUED





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             by securing insurance against liability from an  
             insurance company duly authorized by the state.
          2. Requires the administrative director of the Division of  
             Workers' Compensation (DWC) to review the official  
             medical fee schedules to establish reasonable maximum  
             medical fees for medical services, but excludes, among  
             other things, drugs and pharmacy services, which are set  
             in the relevant Medi-Cal payment system, unless the  
             pharmacy services and drugs are covered by a Medicare  
             fee schedule for facilities.

          3. Requires every employer, either directly or through the  
             employer's insurer, to establish a utilization review  
             process, which would review and approve, modify, delay,  
             or deny treatment recommendations by physicians and the  
             provision of medical treatment services for injured  
             workers.  The utilization review process must be  
             governed by written policies and procedures to ensure  
             that decisions based on the medical necessity of the  
             proposed medical treatment services are consistent with  
             regulations and statute.

          This bill:

          1. Requires that, until the administrative director of the  
             DWC creates a fee schedule for compound medicines, a  
             compound medication may only be reimbursed through the  
             workers' compensation system if:

             A.    The compound medication was found to be  
                medically necessary through the utilization review  
                process.

             B.    All active ingredients in the compound  
                medication are medication ingredients in drug  
                products that have been approved by the federal  
                Food and Drug Administration (FDA) or listed by the  
                United States Pharmacopeia.

             C.    The compound medication is not a copy or  
                substitute for an available FDA-approved product.

             D.    FDA-approved alternatives to the compound  
                medication have been tried with therapeutic failure  







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                or patient intolerance.

          2. Requires that the maximum reimbursement can not exceed  
             the sum of the reimbursements allowed under the existing  
             Medi-Cal fee schedule, and that fees cannot be allowed  
             unless the billing includes the above-listed  
             information.

          3. Prohibits a non-physician from denying an otherwise  
             valid compound medication prescription, and requires  
             that, to the extent applicable, compound medication  
             requests go through the utilization review process.

          4. Empowers the DWC to adopt regulations convenient or  
             necessary to implement these requirements, and that any  
             fee schedule developed for compound medicines must be  
             consistent with these requirements.

           Prior Legislation  

          SB 292 (Speier) of 2005, would have, among other things,  
          prescribed a formula for reimbursing drugs not by the  
          Medi-Cal payment system.  This bill was held under suspense  
          by the Assembly Appropriations Committee.  Passed the  
          Senate Floor with a vote of 40-0, on May 26 2005.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No    
          Local:  No

           SUPPORT  :   (Verified  8/11/10) (per Sen. L&IR Cmte.  
          analysis)

          Association of California Insurance Companies
          California Applicants' Attorneys Association
          California Association of Joint Powers Authorities
          California Chamber of Commerce
          California Coalition on Workers' Compensation
          California Labor Federation, AFL-CIO
          California Manufacturers and Technology Association 
          California Medical Association
          California Professional Firefighters
          California Retailers Association
          California Special Districts Association
          Employers Compensation Insurance Company







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          League of California Cities
          Regional Council of Rural Counties

           OPPOSITION  :    (Verified  8/11/10) (per Sen. L&IR Cmte.  
          analysis)

          California Society of Industrial Medicine and Surgery  
          (unless amended)
          CA Society of Physical Medicine and Rehabilitation (unless  
          amended)
          CompPharma (unless amended)

           ARGUMENTS IN SUPPORT  :    Proponents argue that while  
          compound medicines are a necessity for certain injured  
          workers, there has been a sharp increase in the usage and  
          costs of compound drugs.  Proponents believe that this bill  
          is a good start at establishing guidelines for the  
          compounding of drugs and under what circumstances the cost  
          of those drugs would be reimbursed.  Proponents note in  
          particular that the cap on the maximum allowance on the sum  
          of the amounts allowed for the ingredient and dispensing  
          fee, and believe that these guidelines will rein in the  
          abuse of medical treatment and billing practices specific  
          to the compounding of drugs.

           ARGUMENTS IN OPPOSITION  :    CompPharma, which represents  
          pharmacy benefit management (PBMs) firms, has taken an  
          'oppose unless amended' position.  CompPharma believes that  
          the issues surrounding the cost of pharmaceuticals in the  
          workers' compensation system are larger than compounding,  
          and suggests that this bill takes on a more global  
          perspective, similar to AB 2593 (Bradford), which was  
          sponsored by CompPharma, but was held in Assembly  
          Insurance.  CompPharma suggests amendments that would  
          delink reimbursement rates for pharmacy products from the  
          Medi-Cal system due to the adverse impact of budget cuts  
          and reimbursement rates by a market-based formula, as well  
          as language clarifying the role of pharmacy benefit manager  
          contracts, the fee schedule, and reimbursements.   
          CompPharma believes that these amendments would result in  
          additional cost-savings within the workers' compensation  
          system.

          The California Society of Industrial Medicine and Surgery  







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          (CSIMS) and the California Society of Physical Medicine and  
          Rehabilitation (CSPMR) have also taken an 'oppose unless  
          amended' position.  CSIMS and CSPMR are concerned that  
          requiring compound medication to go through the utilization  
          review process could create unnecessary delays or denial of  
          treatment if the claims adjuster refuses or neglects to  
          respond to the doctor's request for approval of compound  
          medicine.  CSIMS and CSPMR report working with the author's  
          office on a possible amendment, and are optimistic on  
          hitting upon a solution to this issue.

           ASSEMBLY FLOOR  : 
          AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill  
            Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,  
            Bradford, Brownley, Buchanan, Charles Calderon, Carter,  
            Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,  
            DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,  
            Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick,  
            Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill,  
            Huber, Huffman, Jeffries, Knight, Lieu, Logue, Ma,  
            Mendoza, Miller, Monning, Nava, Nestande, Niello,  
            Nielsen, Norby, V. Manuel Perez, Portantino, Ruskin,  
            Salas, Saldana, Silva, Skinner, Smyth, Solorio, Audra  
            Strickland, Swanson, Torlakson, Torres, Tran, Villines,  
            Yamada, John A. Perez
          NO VOTE RECORDED: Bass, Caballero, Jones, Bonnie Lowenthal,  
            Torrico, Vacancy


          PQ:do  8/11/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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