BILL ANALYSIS Ó
SB 447
Page 1
Date of Hearing: July 7, 2015
ASSEMBLY COMMITTEE ON HEALTH
Rob Bonta, Chair
SB
447 (Allen) - As Amended June 1, 2015
SENATE VOTE: 27-4
SUBJECT: Medi-Cal: clinics: drugs and supplies.
SUMMARY: Revises the Medi-Cal and Family Planning, Access,
Care, and Treatment (Family PACT) reimbursement formula for
drugs and supplies dispensed by specified clinics.
Specifically, this bill:
1)Defines "cost" as the sum of the actual acquisition cost of a
drug or supply plus a clinic dispensing fee, for the purposes
of reimbursement by the Department of Health Care Services
(DHCS) to specified clinics for drugs and supplies covered
under the Medi-Cal program and Family PACT Waiver Program.
2)Requires the actual acquisition cost of a drug or supply to be
calculated at least once a year.
3)Defines the clinic dispensing fee as the difference between
the actual acquisition cost of a drug or supply and the
Medi-Cal reimbursement rate. Removes caps to clinic
dispensing fees.
SB 447
Page 2
4)Requires the reimbursement provided by DHCS to be equal to the
amount billed or the Medi-Cal reimbursement rate, whichever is
less.
5)Clarifies that clinics designated as federally qualified
health centers and rural health clinics are authorized to bill
and be reimbursed upon electing to be reimbursed for
pharmaceutical goods and services on a fee-for-service basis
that are specifically delivered through their dispensaries.
EXISTING LAW:
1)Establishes the Medi-Cal program under the direction of DHCS
to provide low-income qualifying individuals health care and a
uniform schedule of benefits.
2)Establishes the Family PACT program under the direction of the
Office of Family Planning to provide eligible low-income
individuals comprehensive family planning services.
3)Requires licensed community clinics, free clinics, and
intermittent clinics (clinics) to bill and be reimbursed for
drugs and supplies covered under the Medi-Cal program and
Family PACT Waiver Program at either cost or the clinic's
usual charge made to the general public, whichever is less.
SB 447
Page 3
4)Defines "cost" as both of the following:
a) An amount equal to the sum of the actual acquisition
cost of a drug or supply plus a clinic dispensing fee which
does not exceed $12 per billing unit, as defined; 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 days or less from the
date medically indicated.
5)Requires the reimbursement to be the Medi-Cal reimbursement
rate or the amount billed, whichever is less, and for
reimbursement to not exceed the net cost of these drugs or
supplies when provided by retail pharmacies under the Medi-Cal
program.
6)Prohibits DHCS from subjecting a clinic to reimbursement
reductions based on a clinic's usual charge to the general
public, if a clinic either: a) furnishes services free of
charge; b) furnishes services at a nominal charge, as defined
by federal law; or, c) can demonstrate, upon request, that it
serves primarily low-income patients, and its customary
practice is to charge patients based on their ability to pay.
7)Authorizes clinics designated as federally qualified health
centers or rural health clinics to bill and be reimbursed if
they choose to be reimbursed for pharmaceutical goods and
services on a fee-for-service basis.
8)Requires a clinic that is eligible to, but has not chosen to,
utilize drugs purchase under the federal drug discount program
SB 447
Page 4
(340B Discount Drug Program) for its Medi-Cal patients, to
provide notification to the federal Health Resources and
Services Administration's Office of Pharmacy Affairs that it
is using non-340B drugs for its Medi-Cal patients in the
manner and to the extent required by federal law.
FISCAL EFFECT: According to the Senate Appropriations
Committee, increased annual costs of at least $6 million
(General Fund (GF)) and $19 million (federal funds) per year to
pay increased reimbursement rates for drugs covered by Medi-Cal.
Would modify the existing statutory limits on Medi-Cal
reimbursement for drugs dispensed by certain clinics. In doing
so, this 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 and
drugs related to family-planning services. Because this 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 DHCS (GF and federal funds).
COMMENTS:
1)PURPOSE OF THIS BILL. According to the author, California's
1152 community health clinics offer a unique option for
low-income patients to receive quality, affordable medical
care. The author contends clinics that dispense medication
onsite provide the additional convenience of allowing patients
to leave their health care provider with medication in hand.
The author maintains that this has led to improved access to
health care and better patient health outcomes. The author
SB 447
Page 5
explains the current billing system the clinics must use is
overly complex and leads to numerous billing errors which
require staff resources for both the clinics and the state.
The author states these errors can take months to resolve and
chronically deny clinics the fees to which they are entitled.
The author points to existing law, stating community clinics
are currently allowed to receive a dispensing fee in addition
to the purchasing cost of the medications they dispense to
Medi-Cal and Family PACT patients, which enables and
encourages clinics to dispense medication onsite. The author
states the original intent of the statutes related to clinic
dispensing fees was for clinics to recover the cost of storing
and dispensing the drugs and to provide clinics with funds to
either expand services or increase the number of patients they
could serve. The author contends further clarity is needed to
define cost in existing law; in some cases clinics are only
reimbursed for the purchasing cost of a drug and without any
additional funds to cover the overhead needed to store the
drug or pay a provider to dispense it to patients. The author
concludes this bill will clarify the obligation of DHCS to
provide a reasonable dispensing fee and specifically set that
fee.
2)BACKGROUND.
a) Physician-administered drugs. A
physician-administered drug is any covered outpatient
drug provided or administered to a recipient, and
billed by a provider other than a pharmacy. Such
providers include, but are not limited to, physician
offices, clinics, and hospitals. A covered outpatient
drug is broadly defined as a drug that may be dispensed
only upon prescription, and is approved for safety and
effectiveness as a prescription drug under the Federal
Food, Drug and Cosmetic Act. Physician-administered
drugs include both injectable and non-injectable drugs.
SB 447
Page 6
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 AB 77 (Frommer), Chapter 503,
Statutes of 2005. Drugs reimbursed under these
provisions are typically birth control medication (oral
contraception, emergency contraception and birth
control patches and rings) and antibiotics.
b) 340B drug pricing program. The 340B Drug Pricing
Program is a federal program that requires drug
manufacturers to provide outpatient drugs to eligible
health care organizations/covered entities at
significantly reduced prices. The 340B Program enables
covered entities to stretch federal resources as far as
possible, reaching more eligible patients and providing
more comprehensive services. The program provides
access to reduced price prescription drugs to over
16,869 health care facilities (as of October 2011)
certified by the U.S. Department of Health and Human
Services as covered entities. These clinics, centers,
and hospitals in turn serve more than 10 million people
in all 50 states, plus commonwealths and territories.
c) Clinic reimbursements. 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
SB 447
Page 7
unit would be calendar month's supply). There is a
separate maximum dispensing fee amount of $17 for
emergency contraception.
Existing law also requires DHCS to reimburse 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
PPAC)) 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 defined as the difference between the
actual acquisition cost of a drug or supply and the
Medi-Cal reimbursement rate.
3)SUPPORT. PPAC, the sponsor of this bill, state this bill will
streamline the process that community clinics use to bill and
be reimbursed for medications that are dispensed onsite. The
sponsor maintains the current reimbursement process is
complicated and often takes month or years to complete,
leaving Planned Parenthood health clinics with millions of
dollars in outstanding reimbursements owed to them. The
sponsor contends that maintaining a reimbursement system that
denies clinics a reasonable dispensing fee undermines the
ability of clinics to provide quality, low cost care to
patients who need it. The sponsor concludes this bill will
simplify the existing reimbursement 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.
SB 447
Page 8
Supporters of this bill state California's community clinics
and health centers offer a unique option for low-income
patients to receive quality, affordable medical care.
Supporters contend clinics that dispense medication onsite
provide patients with the added convenience of leaving their
health care provider with their medication in hand, which
removes barriers to care, increases access to care, and
improves health outcomes. Supporters state this bill will
help provide consistent and equitable reimbursement to clinics
for the health care services they provide, and reduce the
administrative burden clinics face when dispensing medication.
4)PREVIOUS LEGISLATION.
a) AB 2340 (Garcia) of 2014 was gutted and amended last
year in the Senate Health Committee with the contents of
the introduced version of this bill, but was never heard.
b) SB 77 revises the reimbursement formulary for federally
qualified health centers and rural health clinics.
c) AB 2151 establishes the reimbursement formulary for
community care clinics, free clinics, and intermittent
clinics that dispense prescription drugs in the Medi-Cal
and Family PACT program, including a dispensing fee for
physician-administered drugs.
REGISTERED SUPPORT / OPPOSITION:
Support
SB 447
Page 9
Planned Parenthood Affiliates of California (sponsor)
California Primary Care Association
Community Action Fund of Planned Parenthood of Orange and San
Bernardino Counties
Community Clinic Association of Los Angeles
Planned Parenthood Action Fund of the Pacific Southwest
Planned Parenthood Action Fund of Santa Barbara, Ventura, and
San Luis Obispo Counties, Inc.
Planned Parenthood Advocacy Project Los Angeles County
Planned Parenthood Mar Monte
Planned Parenthood Northern California Action Fund
Planned Parenthood Pasadena and San Gabriel Valley
Opposition
None on file.
Analysis Prepared by:An-Chi Tsou / HEALTH / (916)
319-2097
SB 447
Page 10