BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 2779| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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 AB 2779 Page 2 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 AB 2779 Page 3 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 AB 2779 Page 4 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 AB 2779 Page 5 (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 **** END ****