BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON HEALTH
                          Senator Ed Hernandez, O.D., Chair

          BILL NO:                    SB 447    
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          |AUTHOR:        |Allen                                          |
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          |VERSION:       |April 6, 2015                                  |
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          |HEARING DATE:  |April 15, 2015 |               |               |
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          |CONSULTANT:    |Scott Bain                                     |
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           SUBJECT  :  Medi-Cal:  clinics:  drugs and supplies

           SUMMARY  : Revises the Medi-Cal and Family PACT reimbursement formula for  
          drugs and supplies dispensed by specified clinics by requiring  
          the clinic dispensing fee to be the difference between the  
          actual acquisition cost of a drug or supply and the Medi-Cal  
          reimbursement rate, and removes the maximum dispensing fee caps  
          in existing law. 
          
          Existing law:
          1.Establishes the Medi-Cal program, administered by the  
            Department of Health Care Services (DHCS), 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.
           
          2.Establishes the Family Planning Access and Treatment Program  
            (Family PACT Program) to provide comprehensive clinical family  
            planning services to individuals who meet specified income  
            requirements.

          3.Requires a community clinic, a free clinic or an intermittent  
            clinic to be reimbursed for drugs and supplies covered under  
            the Medi-Cal program and Family PACT Waiver Program from  
            exceeding the net cost of these drugs or supplies when  
            provided by retail pharmacies under the Medi-Cal program.

          4.Defines "cost" for purposes of 3) above as:

                  a.        An amount equivalent to the sum of the actual  
                    acquisition cost of a drug or supply plus a clinic  
                    dispensing fee not to exceed $12 per billing unit as  
                    identified in either the Family PACT Policies,  







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                    Procedures, and Billing Instructions Manual, or the  
                    Medi-Cal Inpatient/Outpatient Provider Manual  
                    governing outpatient clinic billing for drugs and  
                    supplies, as applicable; and,

                  b.        The actual acquisition cost for that drug plus  
                    a clinic dispensing fee, not to exceed $17 per  
                    prescription for a take-home drug that is dispensed  
                    for use by the patient within a specific timeframe of  
                    five or less days from the date medically indicated  
                    (effectively, emergency contraception). 

          5.Requires reimbursement to be at the lesser of the amount  
            billed or the Medi-Cal reimbursement rate. Prohibits  
            reimbursement from exceeding the net cost of these drugs or  
            supplies when provided by retail pharmacies under the Medi-Cal  
            program.

          6.Allows federally qualified health centers (FQHCs) and rural  
            health clinics (RHCs) that are community clinics, free clinics  
            or intermittent clinics to bill and be reimbursed under the  
            above-described provisions, upon electing to be reimbursed for  
            pharmaceutical goods and services on a fee-for-service basis.
          
          This bill:
          1.Revises the Medi-Cal and Family PACT reimbursement formula for  
            drugs and supplies dispensed by specified clinics by requiring  
            the clinic dispensing fee to be the difference between the  
            actual acquisition cost of a drug or supply and the Medi-Cal  
            reimbursement rate.

          2.Deletes the $12 and $17 maximum dispensing fee caps in  
            existing law. 

          3.Deletes a prohibition on reimbursement exceeding the net cost  
            of these drugs or supplies when provided by retail pharmacies  
            under the Medi-Cal program.

          4.Requires the actual acquisition cost of drugs and supplies to  
            be calculated not less than annually.

          5.Limits the application of the above-described provisions of  
            existing law providing reimbursement and a dispensing fee for  
            physician-administered drugs and supplies in clinics to only  
            those drugs that are subject to a rebate under the Section  








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            340b provision of federal law (340b requires drug  
            manufacturers to provide outpatient drugs to eligible health  
            care organizations at reduced prices).

          6.Clarifies that the authority of FQHCs and RHCs that are  
            authorized to bill for a dispensing fee under the  
            above-described provisions of existing law is for  
            pharmaceutical goods and services dispensed through their  
            dispensaries.

           FISCAL  
          EFFECT  :  This bill has not been analyzed by a fiscal committee.

           COMMENTS  :
          1.Author's statement. According to the author, California's  
            1,152 community health clinics offer a unique option for  
            low-income patients to receive quality, affordable medical  
            care. Clinics that dispense medication onsite provide the  
            added benefit of a "one stop shop" that allows patients to  
            leave their health care provider with mediation in hand. This  
            convenience has led to improved access to health care and to  
            better patient health outcomes. Current law enables these  
            community clinics to receive a dispensing fee in addition to  
            the purchasing cost of the medications they dispense to  
            Medi-Cal and Family PACT patients. This enables and encourages  
            clinics to dispense medication onsite. However, the current  
            billing system the clinics must use is overly complex, and  
            leads to numerous billing errors which require staff time at  
            both the clinic and the state to resolve. These errors can  
            take months to resolve and chronically deny the clinics  
            Medi-Cal fees to which they are entitled.
          
          2.Background. A physician-administered drug is any covered  
            outpatient drug provided or administered to a Medi-Cal  
            beneficiary and billed by a provider other than a pharmacy. AB  
            2151 (Jackson), Chapter 2051, Statutes of 2004, provided a  
            dispensing fee through Medi-Cal and Family PACT for  
            physician-administered drugs dispensed by a community clinic,  
            a free clinic or an intermittent clinic. Prior to the  
            enactment of AB 2151, Medi-Cal regulations prohibited a  
            dispensing fee or mark-up for take-home drugs dispensed by a  
            clinic. The reimbursement provisions of AB 2151 were modified  
            the following year by SB 77 (Frommer), Chapter 503, Statutes  
            of 2005. Drugs reimbursed under these provisions are typically  
            birth control medication (oral contraception, emergency  








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            contraception and birth control patches and rings) and  
            antibiotics.

          3.Change in reimbursement made by bill. This bill redefines  
            "cost" for purposes of the physician administered drugs and  
            supplies in clinics affected by this bill. Under existing law,  
            clinics  bill  at the lower of cost or the usual charge to the  
            public. "Cost" is defined to include a maximum dispensing fee  
            amount per unit of $12 (an example of a unit would be calendar  
            month's supply). There is a separate maximum dispensing fee  
            amount of $17 for emergency contraception. 


          Under existing law, DHCS  reimburses  at the lower of the amount  
            billed or the Medi-Cal reimbursement rate, except that  
            reimbursement cannot exceed the net cost of these drugs or  
            supplies when provided by retail pharmacies under the Medi-Cal  
            program. The sponsor of this bill (Planned Parenthood  
            Affiliates of California) indicates this bill deletes the  
            reference to the retail pharmacy cap as DHCS has not  
            implemented this cap. The acquisition cost can vary by the  
            type of clinic purchasing (for example, some clinics may  
            receive volume discounts from drug manufacturers). Dispensing  
            fees vary by the type of drug or supply, but not by type of  
            clinic.

          Under this bill, the clinic dispensing fee is the difference  
            between the actual acquisition cost of a drug or supply and  
            the Medi-Cal reimbursement rate. One example, provided by an  
            affiliate clinic of the sponsor, of the change in  
            reimbursement for two types of drugs dispensed by clinics and  
            how the reimbursement would change under this bill is as  
            follows: 
            

           ---------------------------------------------------------------- 
          |  Type of   |  Medi-Cal  |  Current   |  Current   |   Amount   |
          | Medication |  rate on   |reimbursemen|reimbursemen| billed and |
          |            |    file    |  t amount  |     t      | reimbursed |
          |            |            |   billed   |            |  under SB  |
          |            |            |  (cost +   |            |  447 (the  |
          |            |            | dispensing |            |  Medi-Cal  |
          |            |            |    fee)    |            |  rate on   |
          |            |            |            |            |   file)    |
          |------------+------------+------------+------------+------------|








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          |Oral        |    $12     |    $22     |    $12     |    $12     |
          |Contraceptiv|            |            |            |            |
          |e           |            |            |            |            |
          |------------+------------+------------+------------+------------|
          |Emergency   |    $31     |   $22.75   |   $22.75   |    $31     |
          |contraceptiv|            |            |            |            |
          |e           |            |            |            |            |
           ---------------------------------------------------------------- 
            
          4.Prior legislation. AB 2340 (C. Garcia), of 2014, was gutted  
            and amended last year in this committee with the contents of  
            the introduced version of this bill, but was never heard.
            
          5.Support. This bill is sponsored by Planned Parenthood  
            Affiliates of California (PPAC), which argues it would  
            streamline the process that community clinics use to bill and  
            be reimbursed for medications that are dispensed onsite. PPAC  
            states community clinics that dispense drugs offer a "one stop  
            shop" that removes barriers to care, improving access and  
            patient health outcomes, but the complicated system that  
            denies clinics a dispensing fee undermines their ability to  
            provide quality, low cost care to those who need it. PPAC  
            states the actual acquisition cost of a drug and the Medi-Cal  
            rate are reevaluated at least quarterly, and these shifting  
            amounts, along with the "lesser of" standard in existing law  
            for both billing and reimbursement, makes it nearly impossible  
            for its clinics to budget, and it stringently limits the  
            reimbursement received for medications dispensed. PPAC states  
            this complexity has led to massive billing errors that require  
            an inordinate amount of time by both its clinics and the state  
            to resolve, and the reconciliation process is very complicated  
            and often takes months to complete, leaving its clinics with  
            millions of dollars in outstanding reimbursements. PPAC argues  
            it is unconscionable that clinics be expected to shoulder the  
            burden of delayed payments resulting from these errors,  
            essentially subsidizing the state's promise of health care to  
            low-income Medi-Cal enrollees. PPAC states that this bill will  
            simplify the system by setting the dispensing fee at the  
            difference between the acquisition cost and the Medi-Cal  
            reimbursement rate, allowing clinics to bill and be reimbursed  
            at one rate. PPAC concludes that this simplification will go a  
            long way towards providing consistent and equitable  
            reimbursement for the health care services clinics provide and  
            reduce the administration burden clinics face when dispensing  
            medication. 








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           SUPPORT AND OPPOSITION  :
          Support:  
          Planned Parenthood Affiliates of California (sponsor)
          California Family Health Council
          Community Action Fund of Planned Parenthood of Orange and San  
                    Bernardino Counties
          Planned Parenthood Action Fund of the Pacific Southwest
          Planned Parenthood Los Angeles
          Planned Parenthood Mar Monte
          Planned Parenthood Pasadena and San Gabriel Valley
          
          Oppose:   None received

          
          

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