BILL ANALYSIS Ó AB 2711 Page 1 Date of Hearing: March 30, 2016 ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW Cristina Garcia, Chair AB 2711 (Chiu) - As Amended March 17, 2016 SUBJECT: Pharmaceuticals: purchasing SUMMARY: Reinstates a previously repealed requirement for the Department of General Services (DGS) to report to the Legislature on its prescription drug bulk purchasing program. Specifically, this bill: 1)Expresses legislative intent to enact legislation that would include strategies to achieve the greatest savings on prescription drugs with prescription drug manufacturers and wholesalers. 2)Reinstates the repeal of a reporting requirement relating to DGS' prescription drug bulk purchasing program. 3)Requires the reinstated report to include, but not be limited to, all of the following: a) The number and description of entities that participate in the program; AB 2711 Page 2 b) The number and description of contracts with manufacturers and suppliers, including any discounts, rebates or refunds obtained; c) A description of other cost containment strategies that have been, or will be, implemented; and, d) Estimates of the costs and savings associated with the program. 4)Requires DGS to provide the report to the appropriate fiscal and policy committees of the Legislature by February 1, 2017. 5)Sunsets the provisions of this bill on January 1, 2021. EXISTING LAW: 1)Authorizes DGS to negotiate and contract with manufacturers and suppliers of prescription drugs in order to obtain discounts, rebates, or refunds based on quantities purchased. 2)Requires the California Department of Corrections and Rehabilitation, the Department of State Hospitals, and the Department of Developmental Services to participate in the prescription drug bulk purchasing program under the direction of DGS and allows other governmental entities to voluntarily participate. AB 2711 Page 3 3)Permits DGS to contract with a pharmaceutical benefits manager or other entity to negotiate prescription drug rebates and discounts for the state; purchase the drugs; or, act as a consultant to the department. 4)Provides that DGS may explore additional prescription drug cost containment strategies. 5)Repeals a requirement for DGS to report to the Legislature on the prescription drug bulk purchasing program. 6)Requires, in Government Code Section 10231.5, any bill that imposes a reporting requirement to include a sunset date. FISCAL EFFECT: Unknown COMMENTS: SB 1315 (Sher), Chapter 483, Statutes of 2002, authorizes DGS to administer and implement a prescription drug bulk purchasing program, also referred to as the statewide pharmaceutical program (SPP). The SPP allows state and local governmental entities to access contracts for pharmaceutical products and medical or surgical supplies. State prisons, state hospitals, and state developmental centers are required to purchase drugs through the SPP. Other participating agencies include California State University (CSU), California Highway Patrol, California Emergency Medical Services Authority, and the California Department of Veterans Affairs. Under the SPP, DGS contracts with a vendor, AmeriSourceBergen Drug Corporation (ADC), to fill and distribute drug orders to participating departments. ADC acquires the drugs through AB 2711 Page 4 competitively procured state contracts for generic drugs; negotiated state contracts for brand-name drugs; or, through the Massachusetts Alliance for State Pharmaceutical Buying, a group purchasing organization for states. Noncontract drugs are acquired at discounted wholesale prices. SB 1315 also directed DGS to report specific information about the SPP to the Legislature by February 1, 2005. However, subsequent legislation, AB 79 (Dutra), Chapter 409, Statutes of 2004, established a moratorium on numerous legislative reporting requirements due to state budget constraints, including the SB 1315 report, and delayed its due date to January 1, 2008. AB 2877 (Frommer), Chapter 720, Statutes of 2006, repealed the suspended SB 1315 report and instead required the information to be included in a new report to the Legislature on joint activities among DGS, the University of California, and the CSU regarding the procurement of prescription drugs. Finally, in 2009, DGS sponsored legislation, AB 1311 (Duvall), Chapter 284, Statutes of 2009, that repealed reporting requirements it deemed unnecessary to operations, including the SPP report. According to the author, reinstating the report will provide "important and timely information necessary for the development of policies that will ensure access to affordable medications and deliver on the promise of health care coverage and affordability." By requiring information on the costs and savings associated with the SPP, the report could demonstrate whether the various participating entities have been able to leverage their collective buying power to achieve better pricing and more savings for the state. AB 2711 Page 5 SUGGESTED AMENDMENT: Committee staff recommends delaying the report due date to July 2017 to give DGS time to produce it. REGISTERED SUPPORT / OPPOSITION: Support None on file Opposition None on file Analysis Prepared by:Cassie Royce / A. & A.R. / (916) 319-3600