BILL ANALYSIS Ó
AB 2436
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Date of Hearing: May 18, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2436 (Roger Hernández) - As Amended April 27, 2016
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill requires health plans and insurers that provide
coverage for prescription drug benefits to notify an enrollee of
the following information at the time of delivery or within 30
days of purchase of a prescription drug:
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1)The enrollee's share of the cost for the prescription drug,
including any copayment, coinsurance, or other cost sharing,
and the accumulation of that cost sharing to the enrollee's
deductible, if any, or out-of-pocket maximum.
2)The publicly available, nonproprietary wholesale acquisition
cost (WAC) of a prescription drug.
This bill also requires the Department of Managed Health Care
(DMHC) to adopt regulations regarding the manner in which plans
will implement these requirements by January 1, 2018.
FISCAL EFFECT:
This bill will result in regulatory costs to both DMHC and the
California Department of Insurance (CDI), to implement and
establish a standardized process and notice requirements.
1)Costs to CDI of $40,000-$50,000 in FY 2016-17 and
$40,000-$50,000 in FY 2017-18.
2)Costs to the DMHC's Office of Legal Services (OLS) of around
$65,000 in FY 2016-17, $68,000 in FY 2017-18, and $65,000 in
FY 2018-19.
COMMENTS:
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1)Purpose. The author states that this bill takes an important
step towards transparency on prescription drug pricing for
consumers.
2)Background. Rising prescription drug costs have recently been
a subject of intense media scrutiny and public discussion.
Gilead's Sovaldi, a breakthrough Hepatitis C treatment gained
the moniker "the $1,000 pill." The CEO of Turing
Pharmaceuticals, Martin Shkreli, became a household name after
the company was widely criticized for raising the price of
daraprim, a drug that treats toxoplasmosis in HIV patients, by
over 5000% following its acquisition of rights to the drug in
2015.
Health care coverage is a delicate balancing act between
providing high-quality care at a cost that is affordable for
both consumers and for other payers (generally employers and
government). Under current law, health plans and
pharmaceutical benefit managers attempt to meet patient needs
for medication in a way that minimizes drug costs through
negotiations with manufacturers, while meeting clinical
standards of appropriate care. It is also recognized that
some pharmaceutical profits are invested in innovation that
potentially benefits consumers through new or better drug
treatments, and that the development costs and failure rates
for new drugs are high.
According to the Organization for Economic Cooperation and
Development (OECD), the United States is a clear outlier in
pharmaceutical spending, spending significantly more than all
other highly developed countries on pharmaceutical drugs,
although U.S. drug spending is modest as a percentage of U.S.
total health spending. Pharmaceutical costs have recently
grown quickly, however. According to the Centers for Medicare
and Medicaid Services (CMS), prescription drug spending
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increased 12.2% to $297.7 billion in 2014, faster than the
2.4% growth in 2013. The increase is attributable to, among
other factors, price inflation, reduced competition in the
generic market, and the introduction of new high-cost
specialty drugs.
3)Support. Health Access California, the sponsor of this bill,
states that this bill would inform consumers about the costs
of their prescription medications. The sponsor states that
the United States is unusual among nations in relying on
health plans and health insurers to negotiate prices for
prescription drugs, and that those prices are far higher than
in other countries. This bill is supported by other groups
including Western Center on Law and Poverty, SEUI California,
California Labor Federation, and Consumers Union.
4)Opposition Health plans and insurers, the California Chamber
of Commerce, and the California Life Sciences Association
oppose this bill. Blue Shield of California (BSC) states that
this bill imposes duplicative requirements on health plans to
disclose information to members, and that reporting the
accumulation of cost sharing is an unworkable requirement.
5)Related Legislation. SB 1010 (Ed Hernandez), requires health
plans and health insurers to file with regulators specified
cost information regarding covered prescription drugs and
requires notification by manufacturers of drug price
increases.
6)Prior Legislation.
a) AB 463 (Chiu) of 2015 would have required
pharmaceutical companies to file an annual report with
the Office of Statewide Health Planning and Development
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containing specified information regarding the
development and pricing of prescription drugs. The
Assembly Health Committee hearing was canceled at the
request of the author.
b) AB 339 (Gordon), Chapter 619, Statutes of 2015,
among other provisions, capped co-payments for
prescription drugs.
7)Staff Comment. The fiscal estimate assumes CDI issues
regulations, but the bill should be amended to grant CDI the
explicit authority needed to issue the regulations.
Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081