Amended in Assembly August 16, 2016

Amended in Assembly August 2, 2016

Amended in Senate May 31, 2016

Amended in Senate March 30, 2016

Senate Bill No. 1010

Introduced by Senator Hernandez

(Principal coauthor: Assembly Member Chiu)

February 11, 2016

An act to amend Section 1385.045 of, to add Section 1367.245 to, and to add begin insert and repeal end insert Chapter 9 (commencing with Section 127675) begin delete to end delete begin insert of end insert Part 2 of Division 107 of, the Health and Safety Code, and to amend Section 10181.45 of, and to add Section 10123.204 to, the Insurance Code, relating to health care.

LEGISLATIVE COUNSEL’S DIGEST

SB 1010, as amended, Hernandez. Health care: prescription drug costs.

Existing law, the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act), provides for the licensure and regulation of health care service plans by the Department of Managed Health Care (DMHC) and makes a willful violation of the act a crime. Existing law also provides for the regulation of health insurers by the Department of Insurance (DOI). Existing law requires health care service plans and health insurers to file specified rate information with DMHC or DOI, as applicable, for health care service plan contracts or health insurance policies in the individual or small group markets and for health care service plan contracts and health insurance policies in the large group market.

This bill would require health care service plans or health insurers that file the above-described rate information to report to DMHC or DOI, on a date no later than the reporting of the rate information, specified cost information regarding covered prescription drugs, including generic drugs, brand name drugs, and specialty drugs begin delete provided in an outpatient setting. end delete begin insert dispensed as provided. end insert The information reported would include, but not be limited to, the 25 most frequently prescribed drugs and the 25 most costly drugs by total plan or insurer spending. DMHC and DOI would be required to compile the reported information into a report for the public and legislators that demonstrates the overall impact of drug costs on health care premiums and publish the reports on their Internet Web sites by October 1 of each year. Except for the report, DMHC and DOI would be required to keep confidential all information provided pursuant to these provisions.

Because a willful violation of the Knox-Keene Act is a crime, this bill would impose a state-mandated local program.

This bill, begin insert effective January 1, 2018, end insert except as provided, would require a manufacturer of a begin delete branded end delete prescription drug to notify in writing state purchasers, health care service plans, health insurers, begin insert and end insert pharmacy benefit begin delete managers, and the chairs of specified Senate and Assembly committees end delete begin insert managers end insert if it is increasing the wholesale acquisition cost of the drug begin delete by more than 10% or by more than $10,000 during any 12-month period. The bill, except as provided, would require a manufacturer of a generic prescription drug, as defined, with a specified wholesale acquisition cost to notify state purchasers, health care service plans, health insurers, pharmacy benefit managers, and the chairs of specified Senate and Assembly committees if it is increasing the wholesale acquisition cost of the drug by more than 25% during any 12-month period. The bill end delete begin insert during any 12-month period by 25% or more based upon the wholesale acquisition cost of the drug and pursuant to a specified schedule, or by more than $10,000. The bill, effective January 1, 2018, end insert would require a manufacturer of a prescription drug to notify in begin delete writing, within 3 days of approval by the federal Food and Drug Administration, end delete begin insert writing, 3 days before the commercial availability of the drug, end insert state purchasers, health care service plans, health insurers, begin insert and end insert pharmacy benefit begin delete managers, and the chairs of specified Senate and Assembly committees end delete begin insert managers end insert if it is introducing a new prescription drug to market at a wholesale acquisition cost of $10,000 or more annually or per course of treatment. The bill would require a manufacturer, within 30 days of notification of a price increase, or notification of the introduction to market of a prescription drug that has a wholesale acquisition cost of $10,000 or more annually or per course of treatment, to report specified information regarding the drug price to begin delete each state purchaser, health care service plan, health insurer, or pharmacy benefit manager end delete begin insert the Office of Statewide Health Planning and Development end insert and would require a manufacturer who fails to provide the required information begin delete within the 30 days end delete to be subject to begin delete a civil end delete begin insert an administrative end insert penalty of $1,000 per begin delete day. end delete begin insert day for every day after the 30-day notification period. end insert The bill would also require a pharmacy benefit manager that receives notice of a price increase consistent with these provisions to provide notice of the price increase to its contracting public and private purchasers, as provided. begin delete The Legislature would be required to keep confidential all information provided pursuant to these provisions. end delete begin insert The bill would define “pricing information,” as specified, would deem it to be confidential information, as specified, would provide that the information is exempt from disclosure under the California Public Records Act, and would require or authorize, as specified, other entities to disclose the information under a certain condition. The bill would make the Office of Statewide Health Planning and Development the entity charged with implementing and enforcing these provisions and would require that office to publish specified information collected pursuant to these provisions on its Internet Website. The bill would repeal these provisions by January 1, 2022. end insert

Existing law requires, for large group health care service plan contracts and health insurance policies, each health care service plan or health insurer to file with DMHC or DOI the weighted average rate increase for all large group benefit designs during the 12-month period ending January 1 of the following calendar year, and to also disclose specified information for the aggregate rate information for the large group market.

This bill would add to that disclosure of information for the aggregate rate information for the large group market, the requirement for health care service plans or health insurers to disclose specified information regarding the cost of covered prescription begin delete drugs, including end delete generic drugs but excluding generic specialty drugs, brand name begin delete drugs end delete begin insert drugs, end insert excluding begin insert brand name end insert specialty drugs, and begin insert brand name and generic end insert specialty drugs dispensed at a pharmacy, network pharmacy, or mail order pharmacy for outpatient use and regarding the use of a pharmacy benefit manager, as prescribed.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Section 1367.245 is added to the Health and
Safety Code, immediately preceding Section 1367.25, to read:

1367.245.  

(a) (1) A health care service plan that reports rate
information pursuant to Section 1385.03 or 1385.045 shall report
the information described in paragraph (2) to the department on a
date no later than it reports the rate information.

(2) For all covered prescription drugs, including generic drugs,
brand name drugs, and specialty drugs begin delete provided in an outpatient
setting, end delete begin insert dispensed at a plan pharmacy, network pharmacy, or mail
order pharmacy for outpatient use, end insert all of the following shall be
reported:

(A) The 25 most frequently prescribed drugs.

(B) The 25 most costly drugs by total plan spending.

(C) The 25 drugs with the highest year-over-year increase in
spending.

(b) The department shall compile the information reported
pursuant to subdivision (a) into a report for the public and
legislators that demonstrates the overall impact of drug costs on
health care premiums. begin delete The data in the report shall be aggregated
and shall not reveal information specific to individual health care
service plans. end delete

begin insert

(1) The data in the report shall be aggregated and shall not
reveal information specific to individual health care service plans.

end insert begin insert

(2) The report shall compare, for the large group market,
aggregate prescription drug spending among health care service
plans that use a pharmacy benefit manager with aggregate
prescription drug spending among health care service plans that
do not use a pharmacy benefit manager.

end insert

(c) For the purposes of this section, a “specialty drug” is one
that exceeds the threshold for a specialty drug under the Medicare
Part D program (Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173)).

(d) By October 1 of each year, the department shall publish on
its Internet Web site the report required pursuant to subdivision
(b).

(e) After the report required in subdivision (b) is released, the
department shall include the report as part of the public meeting
required pursuant to subdivision (b) of Section 1385.045.

(f) Except for the report required pursuant to subdivision (b),
the department shall keep confidential all of the information
provided to the department pursuant to this section, and that
information shall be exempt from disclosure under the California
Public Records Act (Chapter 3.5 (commencing with Section 6250)
of Division 7 of Title 1 of the Government Code).

SEC. 2.  

Section 1385.045 of the Health and Safety Code is
amended to read:

1385.045.  

(a) For large group health care service plan
contracts, each health plan shall file with the department the
weighted average rate increase for all large group benefit designs
during the 12-month period ending January 1 of the following
calendar year. The average shall be weighted by the number of
enrollees in each large group benefit design in the plan’s large
group market and adjusted to the most commonly sold large group
benefit design by enrollment during the 12-month period. For the
purposes of this section, the large group benefit design includes,
but is not limited to, benefits such as basic health care services
and prescription drugs. The large group benefit design shall not
include cost sharing, including, but not limited to, deductibles,
copays, and coinsurance.

(b) (1) A plan shall also submit any other information required
pursuant to any regulation adopted by the department to comply
with this article.

(2) The department shall conduct an annual public meeting
regarding large group rates within three months of posting the
aggregate information described in this section in order to permit
a public discussion of the reasons for the changes in the rates,
benefits, and cost sharing in the large group market. The meeting
shall be held in either the Los Angeles area or the San Francisco
Bay area.

(c) A health care service plan subject to subdivision (a) shall
also disclose the following for the aggregate rate information for
the large group market submitted under this section:

(1) For rates effective during the 12-month period ending
January 1 of the following year, number and percentage of rate
changes reviewed by the following:

(A) Plan year.

(B) Segment type, including whether the rate is community
rated, in whole or in part.

(C) Product type.

(D) Number of enrollees.

(E) The number of products sold that have materially different
benefits, cost sharing, or other elements of benefit design.

(2) For rates effective during the 12-month period ending
January 1 of the following year, any factors affecting the base rate,
and the actuarial basis for those factors, including all of the
following:

(A) Geographic region.

(B) Age, including age rating factors.

(C) Occupation.

(D) Industry.

(E) Health status factors, including, but not limited to,
experience and utilization.

(F) Employee, and employee and dependents, including a
description of the family composition used.

(G) Enrollees’ share of premiums.

(H) Enrollees’ cost sharing, including prescription drugs.

(I) Covered benefits in addition to basic health care services,
as defined in Section 1345, and other benefits mandated under this
article.

(J) Which market segment, if any, is fully experience rated and
which market segment, if any, is in part experience rated and in
part community rated.

(K) Any other factor that affects the rate that is not otherwise
specified.

(3) (A) The plan’s overall annual medical trend factor
assumptions for all benefits and by aggregate benefit category,
including hospital inpatient, hospital outpatient, physician services,
prescription drugs and other ancillary services, laboratory, and
radiology for the applicable 12-month period ending January 1 of
the following year. A health plan that exclusively contracts with
no more than two medical groups in the state to provide or arrange
for professional medical services for the enrollees of the plan shall
instead disclose the amount of its actual trend experience for the
prior contract year by aggregate benefit category, using benefit
categories, to the maximum extent possible, that are the same as,
or similar to, those used by other plans.

(B) The amount of the projected trend separately attributable
to the use of services, price inflation, and fees and risk for annual
plan contract trends by aggregate benefit category, including
hospital inpatient, hospital outpatient, physician services,
prescription drugs and other ancillary services, laboratory, and
radiology. A health plan that exclusively contracts with no more
than two medical groups in the state to provide or arrange for
professional medical services for the enrollees of the plan shall
instead disclose the amount of its actual trend experience for the
prior contract year by aggregate benefit category, using benefit
categories that are, to the maximum extent possible, the same or
similar to those used by other plans.

(C) A comparison of the aggregate per enrollee per month costs
and rate of changes over the last five years for each of the
following:

(i) Premiums.

(ii) Claims costs, if any.

(iii) Administrative expenses.

(iv) Taxes and fees.

(D) Any changes in enrollee cost sharing over the prior year
associated with the submitted rate information, including both of
the following:

(i) Actual copays, coinsurance, deductibles, annual out-of-pocket
maximums, and any other cost sharing by the benefit categories
determined by the department.

(ii) Any aggregate changes in enrollee cost sharing over the
prior years as measured by the weighted average actuarial value,
weighted by the number of enrollees.

(E) Any changes in enrollee benefits over the prior year,
including a description of benefits added or eliminated, as well as
any aggregate changes, as measured as a percentage of the
aggregate claims costs, listed by the categories determined by the
department.

(F) Any cost containment and quality improvement efforts since
the plan’s prior year’s information pursuant to this section for the
same category of health benefit plan. To the extent possible, the
plan shall describe any significant new health care cost containment
and quality improvement efforts and provide an estimate of
potential savings together with an estimated cost or savings for
the projection period.

(G) The number of products covered by the information that
incurred the excise tax paid by the health plan.

(4) (A) For covered prescription begin delete drugs, including generic drugs
but end delete begin insert generic drugs end insert excluding specialty generic drugs, begin insert prescription end insert
brand name drugs excluding specialty drugs, and begin insert prescription
brand name and generic end insert specialty drugs dispensed at a plan
pharmacy, network pharmacy, or mail order pharmacy for
outpatient use all of the following shall be disclosed:

(i) The percentage of the premium attributable to prescription
drug costs for the prior year for each category of prescription drugs
as defined in subparagraph (A).

(ii) The year-over-year increase, as a percentage, in total
spending for each category of prescription drugs as defined in
subparagraph (A).

(iii) The year-over-year increase in per member, per month costs
for drug prices compared to other components of the health care
premium.

(iv) The specialty tier formulary list.

(B) The plan shall include the percentage of the premium
attributable to prescription drugs administered in a doctor’s office
that are covered under the medical benefit as separate from the
pharmacy benefit, if available.

(C) (i) The plan shall include information on its use of a
pharmacy benefit manager, if any, including the components of
the prescription drug coverage described in subparagraphs (A) and
(B) begin delete for which the pharmacy benefit manager is responsible. end delete begin insert that
are managed by the pharmacy benefit manager. end insert

(ii) The plan shall also include the name of the pharmacy benefit
manager.

(d) The information required pursuant to this section shall be
submitted to the department on or before October 1, begin delete 2016, end delete begin insert 2017, end insert
and on or before October 1 annually thereafter. Information
submitted pursuant to this section is subject to Section 1385.07.

(e) For the purposes of this section, a “specialty drug” is one
that exceeds the threshold for a specialty drug under the Medicare
Part D program (Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173)).

SEC. 3.  

Chapter 9 (commencing with Section 127675) is added
to Part 2 of Division 107 of the Health and Safety Code, to read:

 

Chapter  9. Prescription Drug Pricing for Purchasers

 

127675.  

(a) This chapter shall apply to any manufacturer of
a prescription drug that is purchased or reimbursed by any of the
following:

(1) A state purchaser in California, including, but not limited
to, the Public Employees’ Retirement System, the State Department
of Health Care Services, the Department of General Services, and
the Department of Corrections and Rehabilitation, or an entity
acting on behalf of a state purchaser.

(2) A health care service plan licensed pursuant to Section 1353.

(3) A health insurer holding a valid outstanding certificate of
authority from the Insurance Commissioner.

(4) A pharmacy benefit manager as defined in subdivision (j)
of Section 4430 of the Business and Professions Code.

(b) (1)  begin delete A end delete begin insert Effective January 1, 2018, a end insert manufacturer of a begin delete branded end delete
prescription drug begin insert with a wholesale acquisition cost per month
supply or per a course of treatment that lasts less than a month
that comes within the schedule set forth in paragraph (2) end insert shall
notify each state purchaser, health care service plan, health insurer,
or pharmacy benefit manager if it is increasing the wholesale
acquisition cost of a prescription drug begin delete by more than 10 percent or
by more than ten thousand dollars ($10,000) during any 12-month
period. end delete begin insert during any 12-month period by 25 percent or more, or by
more than ten thousand dollars ($10,000). end insert The notice shall be
provided in writing at least 30 days prior to the planned effective
date of the increase. begin delete A copy of the notice shall be provided
concurrently to the Chairs of the Senate Committee on
Appropriations, the Senate Committee on Budget and Fiscal
Review, the Assembly Committee on Appropriations, and the
Assembly Committee on Budget. end delete

begin delete

(2) (A) A manufacturer of a generic prescription drug with a
wholesale acquisition cost of one hundred dollars ($100) or more
per month supply or per a course of treatment that lasts less than
a month shall notify a state purchaser, health care service plan,
health insurer, or pharmacy benefit manager if it is increasing the
wholesale acquisition cost of the prescription drug by more than
25 percent during a 12-month period. The notice shall be provided
in writing at least 30 days prior to the planned effective date of
the increase. A copy of the notice shall be provided concurrently
to the Chairs of the Senate Committee on Appropriations, the
Senate Committee on Budget and Fiscal Review, the Assembly
Committee on Appropriations, and the Assembly Committee on
Budget.

(B) For purposes of this section, a generic prescription drug is
any product that qualifies as a “noninnovator multi-source drug”
as defined by Section 1396r-8 (k)(7)(A)(iii) of Title 42 of the
United States Code, excluding any product approved by the federal
Food and Drug Administration under Section 262(k) of Title 42
of the United States Code. Prescription drugs that do not meet this
definition are subject to reporting requirements pursuant to
paragraph (1).

end delete begin insert

(2) A manufacturer shall provide the notice required pursuant
to paragraph (1) if the prescription drug wholesale acquisition
cost per month supply or per a course of treatment that lasts less
than a month is within the following amounts:

end insert begin insert

(A) For the 2018 calendar year: one hundred dollars ($100) or
more.

end insert begin insert

(B) For the 2019 calendar year: one hundred five dollars ($105)
or more.

end insert begin insert

(C) For the 2020 calendar year: one hundred ten dollars ($110)
or more.

end insert begin insert

(D) On and after January 1, 2021: one hundred sixteen dollars
($116) or more.

end insert

(3)  begin insert (A) end insert begin insert   end insert Within 30 days of notification of a price increase under
paragraph begin delete (1) or (2), end delete begin insert (1), end insert a manufacturer shall report all of the
following information to begin delete each state purchaser, health care service
plan, health insurer, or pharmacy benefit manager: end delete begin insert the Office of
Statewide Health Planning and Development: end insert

begin delete

(A) A justification for the proposed price increase. The
manufacturer may limit the information in the justification to that
which is publicly available.

end delete begin delete

(B)

end delete

begin insert (i end insert begin insert ) end insert  The previous year’s marketing budget for the drug. begin insert The
manufacturer may limit the information to that which is publicly
available. end insert

begin delete

(C)

end delete

begin insert (ii) end insert  The date and price of acquisition if the drug was not
developed by the manufacturer.

begin delete

(D)

end delete

begin insert (iii) end insert  A schedule of price increases for the drug for the previous
five years if it was manufactured by the company, or if the drug
was acquired by the manufacturer within the previous five years,
the price of the drug at the time of the acquisition and in the
calendar year prior to acquisition.

begin insert

(B) The Office of Statewide Health Planning and Development
shall publish data collected pursuant to this paragraph publicly
on its Internet Web site no less than quarterly.

end insert

(4) (A)  begin delete A end delete begin insert Effective January 1, 2018, a end insert manufacturer of a
prescription drug shall notify in writing each state purchaser, health
care service plan, health insurer, or pharmacy benefit manager if
it is introducing a new prescription drug to market at a wholesale
acquisition cost of ten thousand dollars ($10,000) or more annually
or per course of treatment. The notice shall be provided in writing begin delete within three days of the federal Food and Drug Administration
approval. A copy of the notice shall be provided concurrently to
the Chairs of the Senate Committee on Appropriations, the Senate
Committee on Budget and Fiscal Review, the Assembly Committee
on Appropriations, and the Assembly Committee on Budget. end delete begin insert three
days before the commercial availability of a drug approved by the
Federal Food and Drug Administration (FDA). In a case in which
the commercial availability is expected within three days of FDA
approval, a manufacturer may provide a notice pending FDA
approval in order to ensure approved drugs are commercially
available without delay, unless any other law prohibits that
notification, in which case the notice shall be provided as soon as
practicable, but no later than three days after FDA approval. end insert

(B) Within 30 days of notification of a new drug under this
paragraph, a manufacturer shall report begin delete all end delete begin insert both end insert of the following
information to begin delete each state purchaser, health care service plan, health
insurer, or pharmacy benefit manager: end delete begin insert the Office of Statewide
Health Planning and Development: end insert

begin delete

(i) A justification for the introductory price. The manufacturer
may limit the contents of the justification to publicly available
information.

end delete begin delete

(ii)

end delete

begin insert (i) end insert  The expected marketing budget for the drug.

begin delete

(iii)

end delete

begin insert (ii) end insert  The date and price of acquisition if the drug was not
developed by the manufacturer.

begin delete

(5) Failure to report the information required pursuant to
paragraph (3) or subparagraph (B) of paragraph (4) to state
purchasers, health care service plans, health insurers, or pharmacy
benefit managers shall result in a civil penalty of one thousand
dollars ($1,000) per day for every day after the 30-day notification
period.

end delete begin insert

(C) The Office of Statewide Health Planning and Development
shall publish data collected pursuant to this paragraph publicly
on its Internet Web site no less than quarterly.

end insert

(c) Except for prescription drugs subject to paragraph (4) of
subdivision (b), notice shall not be required for a prescription drug
that is not already purchased or reimbursed by a purchaser
described in subdivision (a).

begin delete

(d) The Legislature shall keep confidential all of the information
provided to the Legislature pursuant to this section, and that
information shall be exempt from disclosure under the California
Public Records Act (Chapter 3.5 (commencing with Section 6250)
of Division 7 of Title 1 of the Government Code) and the
Legislative Open Records Act (Article 3.5 (commencing with
Section 9071) of Chapter 1.5 of Part 1 of Division 2 of Title 2 of
the Government Code).

(e) If a pharmacy benefit manager receives a notice of a price
increase consistent with subdivision (b), the pharmacy benefit
manager shall provide notice of the price increase to its contracting
public and private purchasers. Upon request of the purchaser, the
pharmacy benefit manager shall also provide the purchaser the
justification provided by the pharmaceutical manufacturer
consistent with subdivision (b).

end delete begin insert

(d) The Office of Statewide Health Planning and Development
may adopt regulations or issue guidance for the implementation
of this chapter.

end insert begin insert

(e) The Office of Statewide Health Planning and Development
may consult with the Department of Managed Health Care, the
Department of Insurance, the California State Board of Pharmacy,
or any state purchaser of prescription drugs, or entity acting on
behalf of a state purchaser, in issuing guidance under subdivision
(d), in adopting necessary regulations, in posting information on
its Internet Web site under this chapter, and in taking any other
action for the purpose of implementing this chapter.

end insert begin insert

(f) The Office of Statewide Health Planning and Development
shall be responsible for the enforcement of these provisions.

end insert begin insert

(g) (1) Any manufacturer of a prescription drug subject to this
section shall comply with the provisions of this chapter.

end insert begin insert

(2) Any manufacturer of a prescription drug subject to this
section that does not report the information required pursuant to
this section to state purchasers, health care service plans, health
insurers, or pharmacy benefit managers is liable for an
administrative penalty of one thousand dollars ($1,000) a day for
every day after the 30-day notification period.

end insert begin insert

(3) An administrative penalty shall be assessed by the Office of
Statewide Health Planning and Development. The office may order
the penalty to be paid after appropriate notice and an opportunity
for a hearing.

end insert begin delete

(f)

end delete

begin insert (h) end insert  This chapter begin delete shall end delete begin insert does end insert not restrict the legal ability of a
pharmaceutical manufacturer to change prices as permitted under
federal law.

begin insert

(i) (1) For purposes of this subdivision, “pricing information”
means advanced notification of a price increase pursuant to
paragraph (1) of subdivision (b) or advanced notification of the
price of a new drug pursuant to subparagraph (A) of paragraph
(4) of subdivision (b).

end insert begin insert

(2) Until the effective date of the increase, pricing information
shall be deemed confidential information that shall not be made
public by an entity described in paragraph (1) of subdivision (a)
and is exempt from disclosure under the California Public Records
Act (Chapter 3.5 (commencing with Section 6250) of Division 7
of Title 1 of the Government Code).

end insert begin insert

(3) (A) Until the effective date of the increase, pricing
information shall be deemed confidential information that shall
not be made public by an entity described in paragraph (2), (3),
or (4) of subdivision (a).

end insert begin insert

(B) Notwithstanding subparagraph (A), an entity described in
paragraph (2) or (3) of subdivision (a) may, and an entity described
in paragraph (4) of subdivision (a) shall, disclose pricing
information to its contracting public and private purchasers that
agree to maintain the confidentiality of the pricing information
until the effective date of the increase. Pricing information received
by a contracting public or private purchaser pursuant to this
chapter shall be deemed confidential information that shall not
be made public by a contracting public or private purchaser and
is exempt from disclosure under the California Public Records
Act (Chapter 3.5 (commencing with Section 6250) of Division 7
of Title 1 of the Government Code).

end insert begin insert

(4) Disclosure of pricing information by a pharmaceutical
manufacturer pursuant to this chapter shall not constitute a waiver
of any protection of the information provided by any other law.

end insert begin insert

(j) This chapter shall remain in effect only until January 1, 2022,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2022, deletes or extends that date.

end insert

SEC. 4.  

Section 10123.204 is added to the Insurance Code, immediately preceding Section 10123.206, to read:

10123.204.  

(a) (1) A health insurer that reports rate
information pursuant to Section 10181.3 or 10181.45 shall report
the information described in paragraph (2) to the department on a
date no later than it reports the rate information.

(2) For all covered prescription drugs, including generic drugs,
brand name drugs, and specialty drugs begin delete provided in an outpatient
setting, end delete begin insert dispensed at a pharmacy, network pharmacy, or mail order
pharmacy for outpatient use, end insert all of the following shall be reported:

(A) The 25 most frequently prescribed drugs.

(B) The 25 most costly drugs by total insurer spending.

(C) The 25 drugs with the highest year-over-year increase in
spending.

(b) The department shall compile the information reported
pursuant to subdivision (a) into a report for the public and
legislators that demonstrates the overall impact of drug costs on
health care premiums. begin delete The data in the report shall be aggregated
and shall not reveal information specific to individual health
insurers. end delete

begin insert

(1) The data in the report shall be aggregated and shall not
reveal information specific to individual health insurers.

end insert begin insert

(2) The report shall compare, for the large group market,
aggregate prescription drug spending among health insurers that
use a pharmacy benefit manager with aggregate prescription drug
spending among health insurers that do not use a pharmacy benefit
manager.

end insert

(c) For the purposes of this section, a “specialty drug” is one
that exceeds the threshold for a specialty drug under the Medicare
Part D program (Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173)).

(d) By October 1 of each year, the department shall publish on
its Internet Web site the report required pursuant to subdivision
(b).

(e) After the report required in subdivision (b) is released, the
department shall include the report as part of the public meeting
required pursuant to subdivision (b) of Section 10181.45.

(f) Except for the report required pursuant to subdivision (b),
the department shall keep confidential all of the information
provided to the department pursuant to this section, and that
information shall be exempt from disclosure under the California
Public Records Act (Chapter 3.5 (commencing with Section 6250)
of Division 7 of Title 1 of the Government Code).

SEC. 5.  

Section 10181.45 of the Insurance Code is amended
to read:

10181.45.  

(a) For large group health insurance policies, each
health insurer shall file with the department the weighted average
rate increase for all large group benefit designs during the 12-month
period ending January 1 of the following calendar year. The
average shall be weighted by the number of insureds in each large
group benefit design in the insurer’s large group market and
adjusted to the most commonly sold large group benefit design by
enrollment during the 12-month period. For the purposes of this
section, the large group benefit design includes, but is not limited
to, benefits such as basic health care services and prescription
drugs. The large group benefit design shall not include cost sharing,
including, but not limited to, deductibles, copays, and coinsurance.

(b) (1) A health insurer shall also submit any other information
required pursuant to any regulation adopted by the department to
comply with this article.

(2) The department shall conduct an annual public meeting
regarding large group rates within three months of posting the
aggregate information described in this section in order to permit
a public discussion of the reasons for the changes in the rates,
benefits, and cost sharing in the large group market. The meeting
shall be held in either the Los Angeles area or the San Francisco
Bay area.

(c) A health insurer subject to subdivision (a) shall also disclose
the following for the aggregate rate information for the large group
market submitted under this section:

(1) For rates effective during the 12-month period ending
January 1 of the following year, number and percentage of rate
changes reviewed by the following:

(A) Plan year.

(B) Segment type, including whether the rate is community
rated, in whole or in part.

(C) Product type.

(D) Number of insureds.

(E) The number of products sold that have materially different
benefits, cost sharing, or other elements of benefit design.

(2) For rates effective during the 12-month period ending
January 1 of the following year, any factors affecting the base rate,
and the actuarial basis for those factors, including all of the
following:

(A) Geographic region.

(B) Age, including age rating factors.

(C) Occupation.

(D) Industry.

(E) Health status factors, including, but not limited to,
experience and utilization.

(F) Employee, and employee and dependents, including a
description of the family composition used.

(G) Insureds’ share of premiums.

(H) Insureds’ cost sharing, including for prescription drugs.

(I) Covered benefits in addition to basic health care services,
as defined in Section 1345 of the Health and Safety Code, and
other benefits mandated under this article.

(J) Which market segment, if any, is fully experience rated and
which market segment, if any, is in part experience rated and in
part community rated.

(K) Any other factor that affects the rate that is not otherwise
specified.

(3) (A) The insurer’s overall annual medical trend factor
assumptions for all benefits and by aggregate benefit category,
including hospital inpatient, hospital outpatient, physician services,
prescription drugs and other ancillary services, laboratory, and
radiology for the applicable 12-month period ending January 1 of
the following year. A health insurer that exclusively contracts with
no more than two medical groups in the state to provide or arrange
for professional medical services for the health insurer’s insureds
shall instead disclose the amount of its actual trend experience for
the prior contract year by aggregate benefit category, using benefit
categories, to the maximum extent possible, that are the same or
similar to those used by other insurers.

(B) The amount of the projected trend separately attributable
to the use of services, price inflation, and fees and risk for annual
policy trends by aggregate benefit category, including hospital
inpatient, hospital outpatient, physician services, prescription drugs
and other ancillary services, laboratory, and radiology. A health
insurer that exclusively contracts with no more than two medical
groups in the state to provide or arrange for professional medical
services for the insureds shall instead disclose the amount of its
actual trend experience for the prior contract year by aggregate
benefit category, using benefit categories that are, to the maximum
extent possible, the same or similar to those used by other insurers.

(C) A comparison of the aggregate per insured per month costs
and rate of changes over the last five years for each of the
following:

(i) Premiums.

(ii) Claims costs, if any.

(iii) Administrative expenses.

(iv) Taxes and fees.

(D) Any changes in insured cost sharing over the prior year
associated with the submitted rate information, including both of
the following:

(i) Actual copays, coinsurance, deductibles, annual out-of-pocket
maximums, and any other cost sharing by the benefit categories
determined by the department.

(ii) Any aggregate changes in insured cost sharing over the prior
years as measured by the weighted average actuarial value,
weighted by the number of insureds.

(E) Any changes in insured benefits over the prior year,
including a description of benefits added or eliminated as well as
any aggregate changes as measured as a percentage of the aggregate
claims costs, listed by the categories determined by the department.

(F) Any cost containment and quality improvement efforts made
since the insurer’s prior year’s information pursuant to this section
for the same category of health insurer. To the extent possible, the
insurer shall describe any significant new health care cost
containment and quality improvement efforts and provide an
estimate of potential savings together with an estimated cost or
savings for the projection period.

(G) The number of products covered by the information that
incurred the excise tax paid by the health insurer.

(4) (A) For covered prescription begin delete drugs, including generic drugs
but end delete begin insert drugs in each of the follow categories, generic drugs end insert excluding
specialty generic drugs, brand name drugs excluding specialty
drugs, and begin insert brand name and generic end insert specialty drugs dispensed at
a pharmacy, network pharmacy, or mail order pharmacy for
outpatient use all of the following shall be disclosed:

(i) The percentage of the premium attributable to prescription
drug costs for the prior year for each category of prescription drugs
as defined in subparagraph (A).

(ii) The year-over-year increase, as a percentage, in total
spending for each category of prescription drugs as defined in
subparagraph (A).

(iii) The year-over-year increase in per member, per month costs
for drug prices compared to other components of the health care
premium.

(iv) The specialty tier formulary list.

(B) The insurer shall include the percentage of the premium
attributable to prescription drugs administered in a doctor’s office
that are covered under the medical benefit as separate from the
pharmacy benefit, if available.

(C) (i) The insurer shall include information on its use of a
pharmacy benefit manager, if any, including the components of
the prescription drug coverage described in subparagraphs (A) and
(B) begin delete for which the pharmacy benefit manager is responsible. end delete begin insert that
are managed by the pharmacy benefit manager. end insert

(ii) The insurer shall also include the name of the pharmacy
benefit manager.

(d) The information required pursuant to this section shall be
submitted to the department on or before October 1, begin delete 2016, end delete begin insert 2017, end insert
and on or before October 1 annually thereafter. Information
submitted pursuant to this section is subject to Section 10181.7.

(e) For the purposes of this section, a “specialty drug” is one
that exceeds the threshold for a specialty drug under the Medicare
Part D program (Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173)).

SEC. 6.  

The Legislature finds and declares that Sections 1, 3,
and 4 of this act, which add Sections 1367.245 and 127675 to the
Health and Safety Code and Section 10123.204 to the Insurance
Code, impose a limitation on the public’s right of access to the
meetings of public bodies or the writings of public officials and
agencies within the meaning of Section 3 of Article I of the
California Constitution. Pursuant to that constitutional provision,
the Legislature makes the following findings to demonstrate the
interest protected by this limitation and the need for protecting
that interest:

In order to protect proprietary, confidential information reported
by prescription drug manufacturers, health care service plans, and
health insurers, and to protect the integrity of the competitive
market, it is necessary that this act limit the public’s right of access
to that information.

SEC. 7.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.