BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 627|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
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THIRD READING
Bill No: AB 627
Author: Gomez (D), et al.
Amended: 6/16/15 in Senate
Vote: 21
SENATE BUS, PROF. & ECON. DEV. COMMITTEE: 9-0, 6/15/15
AYES: Hill, Bates, Berryhill, Block, Galgiani, Hernandez,
Jackson, Mendoza, Wieckowski
ASSEMBLY FLOOR: 77-0, 5/7/15 - See last page for vote
SUBJECT: Pharmacy benefit managers: contracting pharmacies
SOURCE: Author
DIGEST: This bill updates the Pharmacy Law related to
reimbursement to pharmacies by pharmacy benefit managers for
prescription medication dispensed to patients.
ANALYSIS:
Existing law:
1)Provides, under the Pharmacy Law, for the licensure and
regulation of pharmacies, pharmacists and wholesalers of
dangerous drugs or devices by the Board of Pharmacy within the
Department of Consumer Affairs. (Business and Professions
Code (BPC) § 4000 et seq.)
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2)Defines "pharmacy benefit manager" (PBM) as a person,
business, or other entity that, pursuant to a contract or
under an employment relationship with a carrier, health
benefit plan sponsor, or other third-party payer, either
directly or through an intermediary, manages the prescription
drug coverage provided by the carrier, plan sponsor, or other
third-party payer, including the processing and payment of
claims for prescription drugs, the performance of drug
utilization review, the processing of drug prior authorization
requests, the adjudication of appeals or grievances related to
prescription drug coverage, contracting with network
pharmacies, and controlling the cost of covered prescription
drugs. (BPC § 4430(g))
This bill:
1)Requires a PBM to include information identifying any national
drug pricing compendia or other data sources used to determine
the maximum allowable cost (MAC) for the drugs on a MAC List
in a contract entered into or renewed on or after January 1,
2016, with a contracting pharmacy. Requires a PBM to 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.
2)Prohibits a drug from being included on a MAC List or
reimbursed on a MAC basis unless all of the following apply:
a) The drug is listed as "A" or "B" rated in the most
recent version of the federal Food and Drug
Administration's approved drug products with therapeutic
equivalent evaluations, also known as the Orange Book or
has an "NA" or "NR" rating or a similar rating by a
nationally recognized pricing reference, such as Medi-Span
or First DataBank.
b) The drug is generally available for purchase in the
state from a national or regional wholesaler.
c) The drug is not obsolete.
3)Requires a PBM, for contracts entered into or renewed on or
after January 1, 2016, to review and make necessary
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adjustments to the MAC of each drug on a MAC List using the
most recent data sources available at least once every seven
days and requires a PBM to have a clearly defined process for
a contracting pharmacy to appeal the MAC for a drug on a MAC
List.
4)Provides that if a PBM denies an appeal, the PBM must provide
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 to the contracting pharmacy. Provides that
if an appeal is upheld by a PBM, the PBM must adjust 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.
Requires the PBM to allow 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 the MAC List
and any information it receives from a PBM, or through a
pharmacy services administrative organization, to a third
party.
6)Clarifies that the bill does not apply to PBM contract
standards for pharmacy networks set by the Division of
Workers' Compensation.
Background
Pharmacies generally 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 the cost of the drug dispensed as
well as a pre-set professional dispensing fee. Most health
plans and PBMs reimburse pharmacies for name brand drugs based
on national pricing lists and for generic drugs based on
proprietary MAC Lists which PBMs establish based on national and
regional drug pricing data in an attempt to reimburse pharmacies
as close as possible to the current market rate for drugs.
According to the author, drug prices fluctuate frequently and if
the price of a drug increases, the pharmacy pays that higher
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price. The author adds that if a PBM does not update its MAC
List regularly, the pharmacy may be reimbursed far less for a
drug than they paid to acquire it, incurring a financial loss.
Through this bill, the author wishes to prevent pharmacies from
potentially stopping purchasing a drug altogether in instances
where the acquisition cost of the drug and the MAC List rate is
significantly different, thus ensuring that patients can obtain
prescription drugs and pharmacies do not suffer unnecessary
financial losses.
Pharmacy benefit managers. According to a 2005 Federal Trade
Commission report on PBMs and mail-order pharmacies, 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
sponsor's members can fill prescriptions easily and in multiple
locations. When a consumer fills a prescription at a local
pharmacy, the pharmacist usually asks whether the consumer has
insurance to cover the prescription's cost. If there is
coverage, the consumer provides the insurance card to the
pharmacist. While the pharmacist fills the prescription,
sophisticated computer interactions between the pharmacy and the
PBM ensure that the prescription is filled according to the
insurance coverage provided by the plan sponsor. According to
the report, the consumer usually is unaware of these processing
interactions, and the consumer's only additional responsibility
is to pick up the filled prescription and pay the retail
pharmacy the copayment that is due.
Legislation similar to this bill has passed in 17 states since
2013 and 15 states currently have pending legislation to address
appeals and transparency in MAC-based pharmacy reimbursement.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified6/17/15)
California Pharmacists Association
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OPPOSITION: (Verified6/17/15)
None received
ARGUMENTS IN SUPPORT: The California Pharmacists Association
(CPhA) notes that it will establish fair standards for
reimbursement to pharmacies and enacts important transparency
and accuracy requirements that will help independent community
pharmacies continue to provide care to California patients.
CPhA writes that "Like all healthcare 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."
ASSEMBLY FLOOR: 77-0, 5/7/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau,
Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly,
Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark
Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,
Wood, Atkins
NO VOTE RECORDED: Campos, Roger Hernández, Steinorth
Prepared by:Sarah Mason / B., P. & E.D. / (916) 651-4104
6/17/15 13:57:35
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