BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 1010 (Hernandez) - Health care: prescription drug costs
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|Version: March 30, 2016 |Policy Vote: HEALTH 7 - 2 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: May 2, 2016 |Consultant: Brendan McCarthy |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 1010 would require health plans and health insurers
that report information on premium rates to their regulator to
also include specified information relating to prescription drug
spending. The bill would require drug manufacturers to report to
state purchasers of health care services when drug prices are
going to increase by more than 10% or when new drugs costing
more than $10,000 per course of treatment are going to be
introduced to the market.
Fiscal
Impact:
One-time costs of $220,000 and ongoing costs of $250,000 per
year for review of drug pricing information submitted by
health plans and to report to the Legislature by the
Department of Managed Health Care (Managed Care Fund). The
costs above include contract costs to study the economic
impact of drug prices on health care costs.
Likely ongoing costs in the low hundreds of thousands per year
SB 1010 (Hernandez) Page 1 of
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for review of drug pricing information submitted by health
insurers and to report to the Legislature by the Department of
Insurance (Insurance Fund).
Unknown costs for enforcement of the reporting requirement on
drug manufacturers by the Office of Statewide Health Planning
and Development (California Health Data and Planning Fund).
The bill places a requirement on drug manufacturers to report
information on prices to state health care purchasers. The
bill places this provision within the body of law overseen by
the Office. However, the Office indicates that the bill, as
drafted, does not give the Office legal authority to enforce
this reporting requirement.
Background: Under current law, proposed rate increases in the individual
market and small group markets are reviewed by either the
Department of Insurance or Department of Managed Health Care to
determine whether they are reasonable. Neither department has
the authority to regulate proposed rates, even if they are found
to be unreasonable. Also, in the large group market, health
plans and health insurers are required to file specified
aggregate information about proposed rate increases.
Proposed Law:
SB 1010 would require health plans and health insurers that
report information on premium rates to their regulator to also
include specified information relating to prescription drug
spending. The bill would require drug manufacturers to report to
state purchasers of health care services when drug prices are
going to increase by more than 10% or when new drugs costing
more than $10,000 per course of treatment are going to be
introduced to the market.
Specific provisions of the bill would:
Require health plans and health insurers that report
information to their regulator regarding rate increases in
the individual and small group markets to also include
information on prescription drug spending;
Require the information for the individual and small
group market to include information on the 25 most
frequently prescribed drugs and their average wholesale
price, the 25 most costly drugs and their average wholesale
price, and the 25 drugs with the highest increase in cost
SB 1010 (Hernandez) Page 2 of
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and their average wholesale price;
Require the Department of Insurance and the Department
of Managed Health Care to compile the above information and
report on the overall impact of drug prices on health care
premiums;
Require the Department of Insurance and the Department
of Managed Health Care to keep the information provided
under the bill confidential;
Require health plans and health insurers in the large
group market that report on premium rate increases to
include information on the share of premiums attributable
to drug prices, increases in premiums attributable to drug
prices, and information on the specialty drug tier
formulary list;
Require manufacturers of branded prescription drugs to
notify state health care purchasers, health plans, and
health insurers if the wholesale acquisition cost of a drug
will increase by more than 10% in a year or if a new drug
is coming to market with a wholesale acquisition cost over
$10,000 per course of treatment;
Require manufacturers of generic prescription drugs to
report if the cost of a drug with a price over $100 will go
up by more than 10%;
Impose a civil penalty of $1,000 per day for failure to
report the required information to state purchasers;
Require the Legislature to hold an annual hearing on
drug prices.
Related
Legislation: SB 908 (Hernandez) would require health plans and
health insurers to notify contract holders if a proposed premium
rate increase has been found to be unreasonable by the
appropriate regulatory agency. That bill is on this committee's
Suspense File.
Staff
Comments: As noted above, the intent of the bill is to enact an
enforceable requirement that drug manufacturers report specified
information to state health purchasers, health insurers, and
health plans. According to the Office of Statewide Health
Planning and Development, the bill does not give the Office
sufficient legal authority to impose the civil penalties on drug
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manufacturers for non-compliance with this requirement.
The bill requires additional disclosure of the impacts of
prescription drug prices to state regulators and purchasers. In
doing so, the bill will give the state and the public better
information on the impact of drug pricing on overall health care
costs. However, it is not likely that the requirement to provide
this information to the state will provide a sufficient
incentive for drug companies to actually reduce prices.
Therefore, it is unlikely that the bill will result in reduced
health care spending on prescription drugs.
The only costs that may be incurred by a local agency relate to
crimes and infractions. Under the California Constitution, such
costs are not reimbursable by the state.
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