BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 447 (Allen) - Medi-Cal: clinics: drugs and supplies ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 6, 2015 |Policy Vote: HEALTH 9 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 11, 2015 |Consultant: Brendan McCarthy | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 447 would increase the rates at which the Medi-Cal program reimburses certain clinics for dispensing medications, by revising existing formulas for determining payments. Fiscal Impact: Increased annual costs of at least $6 million (General Fund) and $19 million (federal funds) per year to pay increased reimbursement rates for drugs covered by Medi-Cal. The bill would modify the existing statutory limits on Medi-Cal reimbursement for drugs dispensed by certain clinics. In doing so, the bill will increase the payment rates by the state for certain drugs. The cost estimates above are based on 2013-14 expenditures for contraceptive drugs and drugs covered under the Medi-Cal and Family PACT program for contraceptive drugs SB 447 (Allen) Page 1 of ? and drugs related to family-planning services. Because the bill does not specifically limit the increased reimbursement to those types of drugs, it is possible that actual costs could be lager. Minor administrative costs to revise existing payment rules and procedures by the Department of Health Care Services (General Fund and federal funds). Background: Under state and federal law, the Department of Health Care Services operates the Medi-Cal program, which provides health care coverage to low income individuals, families, and children. Medi-Cal provides coverage to childless adults and parents with household incomes up to 138 percent of the federal poverty level and to children with household incomes up to 266 percent of the federal poverty level. The federal government provides matching funds that vary from 50 percent to 90 percent of expenditures depending on the category of beneficiary. The state also operates the Family PACT program which provides clinical family planning services to individuals who meet certain income requirements. Current law limits reimbursement for drugs dispensed directly by certain clinics to Medi-Cal or Family PACT beneficiaries. Under current law, clinics bill the state at the lower of their cost to acquire the drugs (plus a specified dispensing fee) or the usual charge to the public. In addition, the Department reimburses clinics at the lower of the amount billed by the clinic or the Medi-Cal reimbursement rate, which is set by the Department based on the rate at which pharmacies are reimbursed or Medicare rates (if applicable). Proposed Law: SB 447 would increase the rates at which the Medi-Cal program reimburses certain clinics for dispensing medications, by revising existing formulas for determining payments. Specific provisions of the bill would: Require the Medi-Cal and Family PACT reimbursement formula for drugs and supplies dispensed by specified clinics to include a SB 447 (Allen) Page 2 of ? dispensing fee equal to the difference between the clinic's actual acquisition cost for the drug and the Medi-Cal reimbursement rate (effectively requiring reimbursement at the Medi-Cal reimbursement rate); Delete the specific dispensing fee amounts in law; Delete a prohibition on reimbursement rates exceeding the net cost of those drugs when dispensed by a retail pharmacy in the Medi-Cal program; Require the actual acquisition price of drugs to be calculated annually; Limit the changes above to those drugs that are subject to rebates from drug manufacturers under federal law. Related Legislation: AB 2340 (C. Garcia, 2014) was gut and amended in the Senate to include the provisions included in this bill. That bill was not heard in the Senate. Staff Comments: Under federal law, drug manufacturers are required to sell prescription drugs at a discount to certain entities who provide health care services to vulnerable populations, such as community clinics. Thus, certain clinics that dispense drugs directly to patients are able to purchase drugs from manufacturers at discounted rates that are not available to pharmacies (although pharmacies are often able to negotiate various discounts and other incentives that reduce their acquisition costs for drugs). Under this bill, reimbursement to specified clinics would go up for certain drugs, but it would not go down for any drugs. As drafted, if the existing Medi-Cal reimbursement rate (generally set based on pharmacy reimbursement rates) is higher than the cost of the drug to the clinic (plus a dispensing fee), the clinic would continue to get the Medi-Cal rate. However, in instances where the Medi-Cal rate is higher than the clinic's cost (plus the dispensing fee), the clinic would receive the Medi-Cal rate. -- END -- SB 447 (Allen) Page 3 of ?