BILL NUMBER: AB 399 AMENDED
BILL TEXT
AMENDED IN SENATE MARCH 5, 2012
AMENDED IN SENATE JUNE 29, 2011
AMENDED IN SENATE JUNE 6, 2011
INTRODUCED BY Assembly Member Bonnie Lowenthal
FEBRUARY 14, 2011
An act to amend Sections 14105.192, 14105.45, 14105.451, and
14105.455 of the Welfare and Institutions Code, relating to Medi-Cal.
LEGISLATIVE COUNSEL'S DIGEST
AB 399, as amended, Bonnie Lowenthal. Medi-Cal: pharmacy
providers: drug reimbursement.
Existing law provides for the Medi-Cal program, which is
administered by the State Department of Health Care Services, under
which qualified low-income individuals receive health care services.
The Medi-Cal program is, in part, governed and funded by federal
Medicaid Program provisions. Existing law requires reimbursement to
Medi-Cal pharmacy providers for drugs, as prescribed , and
authorizes the department to establish a new reimbursement
methodology based on average acquisition cost, as defined .
This bill would modify the way in which reimbursement to Medi-Cal
pharmacy providers is calculated by, in part, authorizing the
department to establish a new reimbursement methodology based on
average acquisition cost. This bill would make other related changes.
This bill would modify requirements relating to the establishment
of the average acquisition cost methodology and would make other
related changes.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 14105.192 of the
Welfare and Institutions Code is amended to read:
14105.192. (a) The Legislature finds and declares the following:
(1) Costs within the Medi-Cal program continue to grow due to the
rising cost of providing health care throughout the state and also
due to increases in enrollment, which are more pronounced during
difficult economic times.
(2) In order to minimize the need for drastically cutting
enrollment standards or benefits during times of economic crisis, it
is crucial to find areas within the program where reimbursement
levels are higher than required under the standard provided in
Section 1902(a)(30)(A) of the federal Social Security Act and can be
reduced in accordance with federal law.
(3) The Medi-Cal program delivers its services and benefits to
Medi-Cal beneficiaries through a wide variety of health care
providers, some of which deliver care via managed care or other
contract models while others do so through fee-for-service
arrangements.
(4) The setting of rates within the Medi-Cal program is complex
and is subject to close supervision by the United States Department
of Health and Human Services.
(5) As the single state agency for Medicaid in California, the
department has unique expertise that can inform decisions that set or
adjust reimbursement methodologies and levels consistent with the
requirements of federal law.
(b) Therefore, it is the intent of the Legislature for the
department to analyze and identify where reimbursement levels can be
reduced consistent with the standard provided in Section 1902(a)(30)
(A) of the federal Social Security Act and consistent with federal
and state law and policies, including any exemptions contained in the
provisions of the act that added this section, provided that the
reductions in reimbursement shall not exceed 10 percent on an
aggregate basis for all providers, services , and
products.
(c) Notwithstanding any other provision of law, the director shall
adjust provider payments, as specified in this section.
(d) (1) Except as otherwise provided in this section, payments
shall be reduced by 10 percent for Medi-Cal fee-for-service benefits
for dates of service on and after June 1, 2011.
(2) For managed health care plans that contract with the
department pursuant to this chapter or Chapter 8 (commencing with
Section 14200), except contracts with Senior Care Action Network and
AIDS Healthcare Foundation, payments shall be reduced by the
actuarial equivalent amount of the payment reductions specified in
this section pursuant to contract amendments or change orders
effective on July 1, 2011, or thereafter.
(3) Payments shall be reduced by 10 percent for non-Medi-Cal
programs described in Article 6 (commencing with Section 124025) of
Chapter 3 of Part 2 of Division 106 of the Health and Safety Code,
and Section 14105.18, for dates of service on and after June 1, 2011.
This paragraph shall not apply to inpatient hospital services
provided in a hospital that is paid under contract pursuant to
Article 2.6 (commencing with Section 14081).
(4) (A) Notwithstanding any other provision of law, the director
may adjust the payments specified in paragraphs (1) and (3) of this
subdivision with respect to one or more categories of Medi-Cal
providers, or for one or more products or services rendered, or any
combination thereof, so long as the resulting reductions to any
category of Medi-Cal providers, in the aggregate, total no more than
10 percent.
(B) The adjustments authorized in subparagraph (A) shall be
implemented only if the director determines that, for each affected
product, service , or provider category, the payments
resulting from the adjustment comply with subdivision (m).
(e) Notwithstanding any other provision of this section, payments
to hospitals that are not under contract with the State Department of
Health Care Services pursuant to Article 2.6 (commencing with
Section 14081) for inpatient hospital services provided to Medi-Cal
beneficiaries and that are subject to Section 14166.245 shall be
governed by that section.
(f) Notwithstanding any other provision of this section, the
following shall apply:
(1) Payments to providers that are paid pursuant to Article 3.8
(commencing with Section 14126) shall be governed by that article.
(2) (A) Subject to subparagraph (B), for dates of service on and
after June 1, 2011, Medi-Cal reimbursement rates for intermediate
care facilities for the developmentally disabled licensed pursuant to
subdivision (e), (g), or (h) of Section 1250 of the Health and
Safety Code, and facilities providing continuous skilled nursing care
to developmentally disabled individuals pursuant to the pilot
project established by Section 14132.20, as determined by the
applicable methodology for setting reimbursement rates for these
facilities, shall not exceed the reimbursement rates that were
applicable to providers in the 2008-09 rate year.
(B) (i) If Section 14105.07 is added to the Welfare and
Institutions Code during the 2011-12 Regular Session of the
Legislature, subparagraph (A) shall become inoperative.
(ii) If Section 14105.07 is added to the Welfare and Institutions
Code during the 2011-12 Regular Session of the Legislature, then for
dates of service on and after June 1, 2011, payments to intermediate
care facilities for the developmentally disabled licensed pursuant to
subdivision (e), (g), or (h) of Section 1250 of the Health and
Safety Code, and facilities providing continuous skilled nursing care
to developmentally disabled individuals pursuant to the pilot
project established by Section 14132.20, shall be governed by the
applicable methodology for setting reimbursement rates for these
facilities and by Section 14105.07.
(g) The department may enter into contracts with a vendor for the
purposes of implementing this section on a bid or nonbid basis. In
order to achieve maximum cost savings, the Legislature declares that
an expedited process for contracts under this subdivision is
necessary. Therefore, contracts entered into to implement this
section and all contract amendments and change orders shall be exempt
from Chapter 2 (commencing with Section 10290) of Part 2 of
Division 2 of the Public Contract Code.
(h) To the extent applicable, the services, facilities, and
payments listed in this subdivision shall be exempt from the payment
reductions specified in subdivision (d) as follows:
(1) Acute hospital inpatient services that are paid under
contracts pursuant to Article 2.6 (commencing with Section 14081).
(2) Federally qualified health center services, including those
facilities deemed to have federally qualified health center status
pursuant to a waiver pursuant to subsection (a) of Section 1115 of
the federal Social Security Act (42 U.S.C. Sec. 1315(a)).
(3) Rural health clinic services.
(4) Payments to facilities owned or operated by the State
Department of Mental Health or the State Department of Developmental
Services.
(5) Hospice services.
(6) Contract services, as designated by the director pursuant to
subdivision (k).
(7) Payments to providers to the extent that the payments are
funded by means of a certified public expenditure or an
intergovernmental transfer pursuant to Section 433.51 of Title 42 of
the Code of Federal Regulations. This paragraph shall apply to
payments described in paragraph (3) of subdivision (d) only to the
extent that they are also exempt from reduction pursuant to
subdivision (l).
(8) Services pursuant to local assistance contracts and
interagency agreements to the extent the funding is not included in
the funds appropriated to the department in the annual Budget Act.
(9) Breast and cervical cancer treatment provided pursuant to
Section 14007.71 and as described in paragraph (3) of subdivision (a)
of Section 14105.18 or Article 1.5 (commencing with Section 104160)
of Chapter 2 of Part 1 of Division 103 of the Health and Safety Code.
(10) The Family Planning, Access, Care, and Treatment (Family
PACT) Program pursuant to subdivision (aa) of Section 14132.
(i) Subject to the exception for services listed in subdivision
(h), the payment reductions required by subdivision (d) shall apply
to the benefits rendered by any provider who may be authorized to
bill for the service, including, but not limited to, physicians,
podiatrists, nurse practitioners, certified nurse-midwives, nurse
anesthetists, and organized outpatient clinics.
(j) Notwithstanding any other provision of law, for dates of
service on and after June 1, 2011, Medi-Cal reimbursement rates
applicable to the following classes of providers shall not exceed the
reimbursement rates that were applicable to those classes of
providers in the 2008-09 rate year, as described in subdivision (f)
of Section 14105.191, reduced by 10 percent:
(1) Intermediate care facilities, excluding those facilities
identified in paragraph (2) of subdivision (f). For purposes of this
section, "intermediate care facility" has the same meaning as defined
in Section 51118 of Title 22 of the California Code of Regulations.
(2) Skilled nursing facilities that are distinct parts of general
acute care hospitals. For purposes of this section, "distinct part"
has the same meaning as defined in Section 72041 of Title 22 of the
California Code of Regulations.
(3) Rural swing-bed facilities.
(4) Subacute care units that are, or are parts of, distinct parts
of general acute care hospitals. For purposes of this subparagraph,
"subacute care unit" has the same meaning as defined in Section
51215.5 of Title 22 of the California Code of Regulations.
(5) Pediatric subacute care units that are, or are parts of,
distinct parts of general acute care hospitals. For purposes of this
subparagraph, "pediatric subacute care unit" has the same meaning as
defined in Section 51215.8 of Title 22 of the California Code of
Regulations.
(6) Adult day health care centers.
(7) Freestanding pediatric subacute care units, as defined in
Section 51215.8 of Title 22 of the California Code of Regulations.
(k) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department may implement and administer this section by means of
provider bulletins or similar instructions, without taking regulatory
action.
(l) The reductions described in this section shall apply only to
payments for services when the General Fund share of the payment is
paid with funds directly appropriated to the department in the annual
Budget Act and shall not apply to payments for services paid with
funds appropriated to other departments or agencies.
(m) Notwithstanding any other provision of this section, the
payment reductions and adjustments provided for in subdivision (d)
shall be implemented only if the director determines that the
payments that result from the application of this section will comply
with applicable federal Medicaid requirements and that federal
financial participation will be available.
(1) In determining whether federal financial participation is
available, the director shall determine whether the payments comply
with applicable federal Medicaid requirements, including those set
forth in Section 1396a(a)(30)(A) of Title 42 of the United States
Code.
(2) To the extent that the director determines that the payments
do not comply with the federal Medicaid requirements or that federal
financial participation is not available with respect to any payment
that is reduced pursuant to this section, the director retains the
discretion to not implement the particular payment reduction or
adjustment and may adjust the payment as necessary to comply with
federal Medicaid requirements.
(n) The department shall seek any necessary federal approvals for
the implementation of this section.
(o) (1) The payment reductions and adjustments set forth in this
section shall not be implemented until federal approval is obtained.
(2) To the extent that federal approval is obtained for one or
more of the payment reductions and adjustments in this section and
Section 14105.07, the payment reductions and adjustments set forth in
Section 14105.191 shall cease to be implemented for the same
services provided by the same class of providers. In the event of a
conflict between this section and Section 14105.191, other than the
provisions setting forth a payment reduction or adjustment, this
section shall govern.
(3) When federal approval is obtained, the payments resulting from
the application of this section shall be implemented retroactively
to June 1, 2011, or on any other date or dates as may be applicable.
(4) The director may clarify the application of this subdivision
by means of provider bulletins or similar instructions, pursuant to
subdivision (k).
(p) Adjustments to pharmacy drug product payment
payments pursuant to this section shall no
longer apply when the department determines that the average
acquisition cost methodology pursuant to Section 14105.45 has been
fully implemented and the department's pharmacy budget
reduction targets, consistent with payment reduction levels pursuant
to this section, have been met .
SEC. 2. Section 14105.45 of the Welfare
and Institutions Code is amended to read:
14105.45. (a) For purposes of this section, the following
definitions shall apply:
(1) "Average acquisition cost" means the average weighted cost
determined by the department to represent the actual acquisition cost
paid for drugs by Medi-Cal pharmacy providers, including those that
provide specialty drugs. The average acquisition cost shall not be
considered confidential and shall be subject to disclosure pursuant
to the California Public Records Act (Chapter 3.5 (commencing with
Section 6250) of Division 7 of Title 1 of the Government Code).
(2) "Average manufacturers price" means the price reported to the
department by the federal Centers for Medicare and Medicaid Services
pursuant to Section 1927 of the Social Security Act (42 U.S.C. Sec.
1396r-8).
(3) "Average wholesale price" means the price for a drug product
listed as the average wholesale price in the department's primary
price reference source , which shall reflect current average
wholesale prices pursuant to regular updates and ongoing maintenance
and shall be concurrently and readily available to pharmacies from
the department's Internet Web site .
(4) "Estimated acquisition cost" means the department's best
estimate of the price generally and currently paid by providers for a
drug product sold by a particular manufacturer or principal labeler
in a standard package.
(5) "Federal upper limit" means the maximum per unit reimbursement
when established by the federal Centers for Medicare and Medicaid
Services and published by the department in Medi-Cal pharmacy
provider bulletins and manuals.
(6) "Generically equivalent drugs" means drug products with the
same active chemical ingredients of the same strength and dosage
form, and of the same generic drug name, as determined by the United
States Adopted Names (USAN) and accepted by the federal Food and Drug
Administration (FDA), as those drug products having the same
chemical ingredients.
(7) "Legend drug" means any drug whose labeling states "Caution:
Federal law prohibits dispensing without prescription," "Rx only," or
words of similar import.
(8) "Maximum allowable ingredient cost" (MAIC) means the maximum
amount the department will reimburse Medi-Cal pharmacy providers for
generically equivalent drugs.
(9) "Innovator multiple source drug," "noninnovator multiple
source drug," and "single source drug" have the same meaning as those
terms are defined in Section 1396r-8(k)(7) of Title 42 of the United
States Code.
(10) "Nonlegend drug" means any drug whose labeling does not
contain the statement referenced in paragraph (7).
(11) "Pharmacy warehouse," as defined in Section 4163 of the
Business and Professions Code, means a physical location licensed as
a wholesaler for prescription drugs that acts as a central warehouse
and performs intracompany sales or transfers of those drugs to a
group of pharmacies under common ownership and control.
(12) "Specialty drugs" means drugs determined by the department
pursuant to subdivision (f) of Section 14105.3 to generally require
special handling, complex dosing regimens, specialized
self-administration at home by a beneficiary or caregiver, or
specialized nursing facility services, or may include extended
patient education, counseling, monitoring, or clinical support.
(13) "Volume weighted average" means the aggregated average volume
for a group of legend or nonlegend drugs, weighted by each drug's
percentage of the group's total volume in the Medi-Cal
fee-for-service program during the previous six months. For purposes
of this paragraph, volume is based on the standard billing unit used
for the legend or nonlegend drugs.
(14) "Wholesaler" means a drug wholesaler that is engaged in
wholesale distribution of prescription drugs to retail pharmacies in
California.
(15) "Wholesaler acquisition cost" means the price for a drug
product listed as the wholesaler acquisition cost in the department's
primary price reference source , which shall reflect current
prices pursuant to regular updates and ongoing maintenance .
(b) (1) Reimbursement to Medi-Cal pharmacy providers for legend
and nonlegend drugs shall not exceed the lowest of either of the
following:
(A) The estimated acquisition cost of the drug plus a professional
fee for dispensing.
(B) The pharmacy's usual and customary charge as defined in
Section 14105.455.
(2) The professional fee shall be seven dollars and twenty-five
cents ($7.25) per dispensed prescription until the department
implements the average acquisition cost methodology, at which time
the department shall pay retail pharmacy providers the professional
fee determined pursuant to subparagraph (F) of paragraph (5) .
The professional fee for legend drugs dispensed to a beneficiary
residing in a skilled nursing facility or intermediate care facility
shall be eight dollars ($8) per dispensed prescription. For purposes
of this paragraph "skilled nursing facility" and "intermediate care
facility" shall have the same meaning as defined in Division 5
(commencing with Section 70001) of Title 22 of the California Code of
Regulations. If the department determines that a change in
dispensing fee is necessary pursuant to this section, the department
shall establish the new dispensing fee through the budget process and
implement the new dispensing fee pursuant to subdivision (d).
(3) The department shall establish the estimated acquisition cost
of legend and nonlegend drugs as follows:
(A) For single source and innovator multiple source drugs, the
estimated acquisition cost shall be equal to the lowest of the
average wholesale price minus 17 percent, the average acquisition
cost, the federal upper limit, or the MAIC.
(B) For noninnovator multiple source drugs, the estimated
acquisition cost shall be equal to the lowest of the average
wholesale price minus 17 percent, the average acquisition cost, the
federal upper limit, or the MAIC.
(C) Average wholesale price shall not be used to establish the
estimated acquisition cost once the department has determined that
the average acquisition cost methodology has been fully implemented.
(4) For purposes of paragraph (3), the department shall establish
a list of MAICs for generically equivalent drugs, which shall be
published in pharmacy provider bulletins and manuals. The department
shall establish a MAIC only when three or more generically equivalent
drugs are available for purchase and dispensing by retail pharmacies
in California. The department shall update the list of MAICs and
establish additional MAICs in accordance with all of the following:
(A) The department shall base the MAIC on the mean of the average
manufacturer's price of drugs generically equivalent to the
particular innovator drug plus a percent markup determined by the
department to be necessary for the MAIC to represent the average
purchase price paid by retail pharmacies in California.
(B) If average manufacturer prices are unavailable, the department
shall establish the MAIC in one of the following ways:
(i) Based on the volume weighted average of wholesaler acquisition
costs of drugs generically equivalent to the particular innovator
drug plus a percent markup determined by the department to be
necessary for the MAIC to represent the average purchase price paid
by retail pharmacies in California.
(ii) Pursuant to a contract with a vendor for the purpose of
surveying drug price information, collecting data, and calculating a
proposed MAIC.
(iii) Based on the volume weighted average acquisition cost of
drugs generically equivalent to the particular innovator drug
adjusted by the department to represent the average purchase price
paid by Medi-Cal pharmacy providers.
(C) The department shall update MAICs at least every three months
and notify Medi-Cal providers at least 30 days prior to the effective
date of a MAIC.
(D) The department shall establish a process for providers to seek
a change to a specific MAIC when the providers believe the MAIC does
not reflect current available market prices. If the department
determines a MAIC change is warranted, the department may update a
specific MAIC prior to notifying providers.
(E) In determining the average purchase price, the department
shall consider the provider-related costs of the products that
include, but are not limited to, shipping, handling, storage, and
delivery. Costs of the provider that are included in the costs of the
dispensing shall not be used to determine the average purchase
price.
(5) (A) The department may establish the average acquisition cost
in one of the following ways:
(i) Based on the volume weighted average acquisition cost adjusted
by the department to ensure that the average acquisition cost
represents the average purchase price paid by retail pharmacies in
California.
(ii) Based on the proposed average acquisition cost as calculated
by the vendor pursuant to subparagraph (B).
(iii) Based on a national pricing benchmark obtained from the
federal Centers for Medicare and Medicaid Services or on a similar
benchmark listed in the department's primary price reference source
adjusted by the department to ensure that the average acquisition
cost represents the average purchase price paid by retail pharmacies
in California.
(B) For the purposes of paragraph (3), the department may contract
with a vendor for the purposes of surveying drug price information,
collecting data from providers, wholesalers, or drug manufacturers,
and calculating a proposed average acquisition cost.
(C) (i) Medi-Cal pharmacy providers shall submit drug price
information to the department or a vendor designated by the
department for the purposes of establishing the average acquisition
cost. The information submitted by pharmacy providers shall include
, but not be limited to, invoice prices
and all discounts, rebates, and refunds known to the provider that
would apply to the acquisition cost of the drug products purchased
during the calendar quarter known to the provider on
the date of delivery as the acquisition cost of the drug products
purchased . Pharmacy warehouses shall be exempt from the survey
process , but shall provide drug cost information upon
audit by the department for the purposes of validating individual
pharmacy provider acquisition costs . Pharmacy invoice
information shall be considered confidential and shall not be
subject to public disclosure under the California Public Records Act
(Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1
of the Government Code).
(ii) Pharmacy providers that fail to submit drug price information
to the department or the vendor as required by this subparagraph
shall receive notice that if they do not provide the required
information within five working 15 business
days, they shall may be subject
to suspension under subdivisions (a) and (c) of Section 14123.
(D) (i) For new drugs or new formulations of existing drugs, where
drug price information is unavailable pursuant to clause (i) of
subparagraph (C), drug manufacturers and wholesalers shall submit
drug price information to the department or a vendor designated by
the department for the purposes of establishing the average
acquisition cost. Drug price information shall include, but not be
limited to, net unit sales of a drug product sold to retail
pharmacies in California divided by the total number of units of the
drug sold by the manufacturer or wholesaler in a specified period of
time determined by the department.
(ii) Drug products from manufacturers and wholesalers that fail to
submit drug price information to the department or the vendor as
required by this subparagraph may not be a reimbursable benefit of
the Medi-Cal program for those manufacturers and wholesalers until
the department has established the average acquisition cost for those
drug products.
(E) Drug pricing information provided to the department or a
vendor designated by the department for the purposes of establishing
the average acquisition cost pursuant to this section 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).
(F) Prior to the implementation of an average acquisition cost
methodology, the department shall collect data through a survey of
pharmacy providers , including specific data from pharmacy
providers that dispense specialty drugs, for purposes of
establishing a professional fee for dispensing , including a
professional fee for dispensing specialty drugs, in compliance
with federal Medicaid requirements. The department shall not
implement average acquisition cost methodology without adjusting and
implementing the pharmacy professional fee for dispensing pursuant to
the survey.
(i) The department shall seek stakeholder input on the retail
pharmacy factors and elements used for the pharmacy survey relative
to both average acquisition costs and dispensing costs. Any
adjustment to the dispensing fee shall not exceed the aggregate
savings associated with
the implementation of the average acquisition cost
methodology.
(ii) For specialty drug products provided by pharmacy
providers pursuant to subdivision (f) of Section 14105.3, a
differential professional fee or payment for services to provide
specialized care may be considered as part of the contracts
established pursuant to that section.
(G) When the department implements the average acquisition cost
methodology, the department shall update the Medi-Cal claims
processing system to reflect the average acquisition cost of drugs
not later than 30 days after the department has established average
acquisition cost pursuant to subparagraph (A).
(H) Notwithstanding any other provision of law, if the department
implements average acquisition cost pursuant to clause (i) or (ii) of
subparagraph (A), the department shall update actual acquisition
costs at least every three months based on average acquisition
costs determined by surveys of pharmacy invoices collected in the
prior three-month period and shall notify Medi-Cal
pharmacy providers at least 30 days prior to the effective
date of any change in an actual acquisition cost.
(I) The department shall establish a process for providers to seek
a change to a specific average acquisition cost when the providers
believe the average acquisition cost does not reflect current
available market prices and shall update the average acquisition
cost within one week of receipt of reasonable information justifying
that the average acquisition cost does not reflect current available
market prices . If the department determines an
average acquisition cost change is warranted, the department may
update a specific average acquisition cost prior to notifying
providers.
(c) The director shall implement this section in a manner that is
consistent with federal Medicaid law and regulations. The director
shall seek any necessary federal approvals for the implementation of
this section. This section shall be implemented only to the extent
that federal approval is obtained.
(d) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, the
department may implement , interpret, or make specific
this section by means of a provider bulletin or notice,
policy letter, or other similar instructions, without taking
regulatory action.
(e) The department may enter into contracts with a vendor for the
purposes of implementing this section on a bid or nonbid basis. In
order to achieve maximum cost savings, the Legislature declares that
an expedited process for contracts under this section is necessary.
Therefore, contracts entered into to implement this section, and all
contract amendments and change orders, shall be exempt from Chapter 2
(commencing with Section 10290) of Part 2 of Division 2 of the
Public Contract Code.
(f) (1) The rates provided for in this section shall be
implemented only if the director determines that the rates will
comply with applicable federal Medicaid requirements and that federal
financial participation will be available.
(2) In determining whether federal financial participation is
available, the director shall determine whether the rates comply with
applicable federal Medicaid requirements, including those set forth
in Section 1396a(a)(30)(A) of Title 42 of the United States Code.
(3) To the extent that the director determines that the rates do
not comply with applicable federal Medicaid requirements or that
federal financial participation is not available with respect to any
rate of reimbursement described in this section, the director retains
the discretion not to implement that rate and may revise the rate as
necessary to comply with federal Medicaid requirements.
(g) The director shall seek any necessary federal approvals for
the implementation of this section.
(h) This section shall not be construed to require the department
to collect cost data, to conduct cost studies, or to set or adjust a
rate of reimbursement based on cost data that has been collected.
(i)
(h) Adjustments to pharmacy drug product
payment payments pursuant to Section 14105.192
shall no longer apply when the department determines that the average
acquisition cost methodology has been fully implemented and
the department's pharmacy budget reduction targets, consistent with
payment reduction levels pursuant to Section 14105.192, have been met
.
(j)
(i) Prior to implementation of this section, the
department shall provide the appropriate fiscal and policy committees
of the Legislature with information on the department's plan for
implementation of the average acquisition cost methodology pursuant
to this section.
SEC. 3. Section 14105.451 of the
Welfare and Institutions Code is amended to read:
14105.451. (a) (1) The Legislature finds and declares all of the
following:
(A) The United States Department of Health and Human Services has
identified the critical need for state Medicaid agencies to establish
pharmacy reimbursement rates based on a pricing benchmark that
reflects actual acquisition costs.
(B) The Medi-Cal program currently uses a methodology based on
average wholesale price (AWP).
(C) Investigations by the federal Office of Inspector General have
found that average wholesale price is inflated relative to average
acquisition cost.
(2) Therefore, it is the intent of the Legislature to enact
legislation by August 1, 2011, that provides for development of a new
reimbursement methodology that will enable the department to achieve
savings while continuing to reimburse pharmacy providers in
compliance with federal law.
(b) Subject to Section 14105.45, the The
department may only require providers,
manufacturers, and wholesalers to submit any data the
director determines necessary or useful information
that is permitted pursuant to Section 14105.45 in
preparing for the transition from a methodology based on average
wholesale price to a methodology based on actual acquisition cost.
(c) If the AWP ceases to be listed updated
and current by the department's primary price reference source
vendor, the department may direct the fiscal intermediary to
establish a process with the primary price reference source vendor to
temporarily report the AWP consistent with the definition of AWP in
Section 14105.45 and shall make the AWPs readily available to
pharmacy providers . If this process is established, it shall
be limited in scope and duration, and shall cease when the department
has fully implemented the average acquisition cost methodology
pursuant to Section 14105.45.
SEC. 4. Section 14105.455 of the
Welfare and Institutions Code is amended to read:
14105.455. (a) Pharmacy providers shall submit their usual and
customary charge when billing the Medi-Cal program for prescribed
drugs.
(b) "Usual and customary charge" means the lower of the following:
(1) The lowest price reimbursed to the pharmacy by other
third-party payers in California, excluding Medi-Cal managed care
plans and Medicare Part D prescription drug plans.
(2) The lowest price routinely offered to any segment of the
general public.
(c) Donations or discounts provided to a charitable organization
are not considered usual and customary charges.
(b) "Usual and customary charge" means the lowest price routinely
offered to any segment of the general public.
(d)
(c) Pharmacy providers shall keep and maintain records
of their usual and customary charges for a period of three years from
the date the service was rendered.
(e)
(d) Payment to pharmacy providers shall be the lower of
the pharmacy's usual and customary charge or the reimbursement rate
pursuant to subdivision (b) of Section 14105.45.
(f)
(e) Notwithstanding Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code, the department may implement , interpret, or make
specific this section by means of a provider bulletin or
notice, policy letter, or other similar instructions, without taking
regulatory action. All matter omitted in this version of the bill
appears in the bill as amended in the Senate, June 29, 2011. (JR11)