BILL ANALYSIS Ó
AB 627
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Date of Hearing: April 14, 2015
ASSEMBLY COMMITTEE ON HEALTH
Rob Bonta, Chair
AB 627
(Gomez) - As Amended March 26, 2015
SUBJECT: Pharmacy benefit managers: contracting pharmacies
SUMMARY: Requires a pharmacy benefit manager (PBM) that
reimburses a contracting pharmacy for a drug on a maximum
allowable costs (MAC) basis to update the MAC list every seven
days, make the MAC list available upon request by the pharmacy,
and to have a standardized appeals process for a pharmacy to
appeal disputes on MAC pricing. Specifically, this bill:
1)Requires a PBM that reimburses a contracting pharmacy for a
drug on a MAC basis to:
a) Include in a contract started or renewed January 1,
2016, information identifying any national drug pricing
compendia or other data sources used to determine the MAC
for the drugs on a maximum allowable cost list; and,
b) Make available to a contracting pharmacy, upon request,
the most up-to-date MAC list or lists used by the PBM for
patients served by that pharmacy in a readily accessible,
secure, and usable Web-based format or other comparable
format.
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2)Prohibits a drug from being reimbursed on a MAC basis unless
the drug is a multi-source drug (generic), is available for
sale from a national or regional wholesaler, and is not
obsolete.
3)Requires a PBM, for contracts starting or renewed January 1,
2016, to update the MAC list at least every seven days.
4)Requires a PBM, for contracts starting or renewed January 1,
2016, to create a clearly defined appeals process that
includes the following provisions:
a) The pharmacy may appeal if the MAC for a drug is below
the cost at which the drug is available for purchase by
similarly situated pharmacies in the state from a national
or regional wholesaler or the drug should not be allowed on
a MAC list based on 2) above;
b) The pharmacy must appeal within 14 business days of the
payment being contested; the PBM must make a final
determination regarding the appeal within seven business
days of receipt of the appeal;
c) If an appeal is denied, the PBM is required to provide
to the pharmacy the reason for the denial and the national
drug code of an equivalent drug that may be purchased by a
similarly situated pharmacy at the price that is equal to
or less than the MAC of the appealed drug; and,
d) If an appeal is upheld, the PBM is required to adjust
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the MAC of the appealed drug for the appealing contracting
pharmacy and all similarly situated contracting pharmacies
in the state within one calendar day of the date of
determination. The PBM is required to permit the appealing
pharmacy to reverse and resubmit the claim upon which the
appeal was based in order to receive the corrected
reimbursement.
5)Prohibits a contracting pharmacy from disclosing to any third
party the MAC list and related information it receives either
directly from a PBM or through a pharmacy services
administrative organization or similar entity.
EXISTING LAW:
1)Establishes the California State Board of Pharmacy to regulate
the pharmacists.
2)Requires health care service plans to be regulated by the
Department of Managed Health Care and health insurers to be
regulated by the California Department of Insurance.
3)Requires health care service plan contracts and health
insurance policies to provide coverage for specified benefits
and requires contracts between plans or insurers and providers
to contain provisions requiring a fast, fair, and
cost-effective dispute resolution mechanism.
FISCAL EFFECT: None
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COMMENTS:
1)PURPOSE OF THIS BILL. According to the author, this bill is
necessary to bring fair standards and transparency to
MAC-based pharmacy reimbursements. Under MAC-based
reimbursement, pharmacies buy generic drugs up front, and then
receive reimbursement for medications they dispense to
patients based on proprietary price lists managed by pharmacy
benefit managers. The market prices of drugs fluctuate
frequently; therefore these price lists need frequent updates
to ensure they reflect the accurate prices that pharmacies pay
to acquire medications. When the price lists are not
appropriately updated, pharmacies lose money by dispensing
medications to patients. Pharmacies are then forced to spend
time filing and tracking appeals, thereby limiting the time
they have to care for patients. The author states that this
would be addressed by requiring MAC lists to be transparent,
accessible, and updated weekly to the current market price for
pharmacies. It also establishes standards for appeals of MAC
prices below the current market price, ensuring that these
appeals are resolved quickly and transparently.
According to the California Pharmacists Association, sponsors
of the bill, this language was developed through negotiations
with stakeholders. The sponsors worked with multiple PBMs and
health plans to arrive at mutually agreed upon standards to
address pharmacists' concerns in a way that is acceptable to
the legitimate needs of the PBMs and health plans. The
provisions in this bill closely mirror those of bills in other
states that PBMs have also agreed to.
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2)BACKGROUND. In general, pharmacies purchase prescription
drugs and pay for them up front. When a patient with health
coverage is prescribed a covered drug that is dispensed by a
contracted pharmacy, the health plan or insurer (or a
contracted PBM) reimburses the pharmacy for: a) the cost of
the drug dispensed; and, b) a pre-set professional dispensing
fee. Most health plans and PBMs reimburse pharmacies for name
brand drugs based on national, publicly available pricing
lists (such as Average Wholesale Price) and for generic drugs
based on proprietary MAC lists. PBMs establish the MAC lists
based on national and regional drug pricing data in an attempt
to standardize reimbursement as close to possible to the
current market rate for the drug.
3)PBMs. According to the Federal Trade Commission, many health
plan sponsors offer their members prescription drug insurance
and hire PBMs to manage these pharmacy benefits on their
behalf. As part of the management of these benefits, PBMs
assemble networks of retail and mail-order pharmacies so that
the plan's sponsor's members can fill prescriptions easily and
in multiple locations. PBMs contract with employers, labor
unions, insurance companies, states, Medicaid and Medicare
managed care plans, and managed care companies (collectively,
"plan sponsors") to manage pharmacy benefits. There are large
PBMs (Express Scripts/Medco, CVS Caremark), small and
insurer-owned PBMs (Aetna, Cigna Corporation, Wellpoint Health
Networks), retailer-owned (Eckerd Health Systems, PharmaCare
Management Services, Walgreens Health Initiative), or
stand-alone retail pharmacies (Rite Aid Corporation, Walgreen,
Wal-Mart Stores, Inc.).
4)Other states. Recent legislation in a number of other states
has addressed appeals and transparency in MAC-based pharmacy
reimbursement. According to the California Pharmacy
Association, seventeen states have passed similar legislation
since 2013, and fifteen states have pending legislation.
5)SUPPORT. The California Pharmacists Association (CPhA),
sponsor of the bill, asserts that like all healthcare
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providers, pharmacies cannot care for patients when they are
forced to continually do so at a loss. This bill sets fair
standards that ensure pharmacies can continue serving patients
while also allowing health plans and PBMs to control costs
through the use of fair MAC-based reimbursement. CPhA
supports this bill to enact important transparency and
accuracy requirements that will help independent community
pharmacies continue to provide care to California patients.
6)PREVIOUS LEGISLATION. SB 1195 (Price), Chapter 706, Statutes
of 2012, requires a contract between a pharmacy and a carrier
or a PBM to provide pharmacy services to beneficiaries of a
health benefit plan to comply with standards and audit
requirements.
7)DOUBLE REFERRED. This bill is double referred, upon passage
of this Committee it will be referred to the Assembly
Committee on Business and Professions.
REGISTERED SUPPORT / OPPOSITION:
Support
California Pharmacists Association (sponsor)
Opposition
None on file.
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Analysis Prepared by:Dharia McGrew / HEALTH / (916) 319-2097