BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 447 (Allen) - Medi-Cal: clinics: drugs and supplies
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|Version: April 6, 2015 |Policy Vote: HEALTH 9 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: May 11, 2015 |Consultant: Brendan McCarthy |
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SUSPENSE FILE. AS AMENDED.
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 (as approved on May 28,
2015):
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
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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
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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.
Author's amendments (as adopted May 28, 2015): delete the
provision of the bill requiring the payment methodology amended
by the bill to only apply to those drugs that are subject to
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rebates under federal law.
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