BILL ANALYSIS Ó SB 1010 Page 1 SENATE THIRD READING SB 1010 (Hernandez) As Amended August 16, 2016 Majority vote SENATE VOTE: 25-10 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Health |12-4 |Wood, Bonilla, Burke, |Maienschein, | | | |Campos, Chiu, Gomez, |Lackey, Patterson, | | | | |Steinorth | | | | | | | | |Roger Hernández, | | | | |Nazarian, | | | | |Ridley-Thomas, | | | | |Rodriguez, Santiago, | | | | |McCarty | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |12-0 |Gonzalez, Bloom, | | | | |Bonilla, Bonta, | | | | |Calderon, Eggman, | | | | |Holden, Quirk, | | | | |Santiago, Weber, | | | | |Wood, McCarty | | SB 1010 Page 2 | | | | | | | | | | ------------------------------------------------------------------ SUMMARY: Requires health care service plans (health plans) and health insurers (collectively carriers) that report rate information to also include information regarding covered prescription drugs, as specified. Requires the Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI) to compile and report this data in an aggregated report to demonstrate the overall impact of drug costs on health care premiums. Requires any manufacturer of a prescription drug, who sells to or is reimbursed by a state purchaser, health plan, health insurer, or pharmacy benefit manager (PBM), to provide notice describing a price increase, as specified. Specifically, this bill: Health Plan and Insurer Requirements 1)Requires carriers that report rate information through existing group and individual rate review process to also report to DMHC and CDI, on a date no later than it reports the rate information, the following information for all covered prescription drugs, including generic, brand name, and specialty drugs dispensed at a health plan pharmacy, network pharmacy or mail order pharmacy for outpatient use: a) The 25 most frequently prescribed drugs; b) The 25 most costly drugs by total plan spending; and, c) The 25 drugs with the highest year-over-year increase in spending. SB 1010 Page 3 2)Requires the DMHC and CDI to compile this information in a report for the public and the Legislature to demonstrate the overall impact of drug costs on health care premiums. Requires the data in the report to be aggregated and prohibits information specific to individual carriers. Requires the report to compare, for the large group market, aggregate prescription drug spending amount carriers that use a PBM with aggregate prescription drug spending among carriers that do not use a PBM. 3)Defines specialty drug as one that exceeds the threshold for a specialty drug under the Medicare Part D program. 4)Requires the DMHC and CDI to publish on its Internet Website the report by October 1 of each year. 5)Requires the information provided to the DMHC and CDI, except for the report in 2) above, to remain confidential and exempt from disclosure under the California Public Records Act (PRA). 6)Requires carriers, as part of large group rate review, to disclose the following information for covered drugs, including: a) generic drugs (except specialty generic drugs); b) brand name drugs (except specialty drugs); and, c) brand name and generic specialty drugs dispensed at a pharmacy, network pharmacy, or mail order pharmacy for outpatient use: a) The percentage of the premium attributable to prescription drug costs for the prior year for each category of prescription drugs; SB 1010 Page 4 b) The year-over-year increase, as a percentage, in total spending for each category of prescription drugs; c) The year-over-year increase in per member, per month costs for drug prices compared to other components of the health care premium; and, d) The specialty tier formulary list. 7)Requires the carrier to 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. 8)Requires the carrier to include information on its use of a PBM, if any, including the prescription drug coverage components described in 6) and 7) above, that are managed by the PBM. Requires the carrier to include the name of the PBM. 9)Requires the carrier to provide the above information to the DMHC and CDI on or before October 1, 2017, and on or before October 1 annually thereafter. Prescription Drug Pricing for Purchasers 10)Applies to any manufacturer of a prescription drug that is purchased by or reimbursed by a state purchaser in California, as specified, a health plan, a health insurer, or PBM, as defined. SB 1010 Page 5 11)Requires, effective January 1, 2018, a prescription drug manufacturer with a wholesale acquisition cost (WAC) per month supply or per a course of treatment that lasts less than a month that comes within the schedule set forth in 13) below, to notify each state purchaser, health plan, health insurer, or PBM if it is increasing the WAC of a prescription drug during any 12 month period by 25% of more, or by more than $10,000. 12)Requires the notice to be provided in writing at least 30 days prior to the planned effective date of the increase. 13)Requires a manufacturer to provide the notice in 11) above, if the prescription WAC per month supply or per a course of treatment that lasts less than a month is within the following amounts: a) For the 2018 calendar year, $100 or more; b) For the 2019 calendar year, $105 or more; c) For the 2020 calendar year, $110 or more; and, d) On or after July 21, 2021, $116 or more. 14)Requires a manufacturer, within 30 days of notification of a price increase under 11) above, to report all of the following information to the Office of Statewide Health Planning and Development (OSHPD): a) The previous year's marketing budget for the drug. SB 1010 Page 6 Permits the manufacturer to limit the information to that which is publicly available; b) The date and price of the acquisition if the drug was not developed by the manufacturer; and, c) 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 drug price at the time of the acquisition and in the calendar year prior to the acquisition. 15)Requires OSHPD to publicly publish data collected in 14) above, on its Internet Website no less than quarterly. 16)Requires, effective January 1, 2018, a prescription drug manufacturer to notify each state purchaser, health plan, health insurer, or PBM if it is introducing a new prescription drug to market at a WAC of $10,000 or more annually or per course of treatment. Requires the notice to be in writing three days before the commercial availability of a drug approved by the Food and Drug Administration (FDA). Permits a manufacturer to provide notice pending FDA approval in order to ensure approved drugs are commercially available without delay in cases in which the commercial availability is expected within three days of FDA approval. Permits the notice to be provided as soon as practicable but no later than three days after FDA approval if any other law prohibits that notification. 17)Requires a manufacturer, within 30 days of the notification of a new drug under 16) above, to report both of the following information to OSHPD: SB 1010 Page 7 a) The expected marketing budget for the drug; and, b) The date and price of acquisition if the drug was not developed by the manufacturer. 18)Requires OSHPD to publicly publish data collected pursuant to 17) above, on its Internet Web site no less than quarterly. 19)Specifies that notice is not required for a prescription drug that is not already purchased or reimbursed by a purchaser described in 10) above. 20)Permits OSHPD to adopt regulations or issue guidance for the implementation of this bill. 21)Permits OSHPD to consult with DMHC, CDI, 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 20) above, in adopting necessary regulations, in posting information on its Internet Web site, and in taking any other action for the purpose of this bill. 22)Requires OSHPD to be responsible for enforcing the provisions of this bill, as specified. 23)Requires a prescription drug manufacturer to comply with the provisions of this bill. 24)Specifies that a prescription drug manufacturer that fail to SB 1010 Page 8 report information required in this bill is liable for an administrative penalty of $1,000 a day for every day after the 30 day notification period. 25)Requires OSHPD to assess the administrative penalty and permits OSHPD to order the penalty to be paid after appropriate notice and an opportunity for a hearing. 26)Specifies that this bill does not restrict the legal ability of a manufacturer to change prices as permitted under federal law. 27)Defines pricing information as advanced notification of a price increase pursuant to 11) above, or advanced notification of the price of a new drug pursuant to 16) above. 28)Specifies that pricing information is deemed confidential information and exempt from California PRA disclosure until the effective date of the increase, as specified. 29)Sunsets on January 1, 2022, unless a later enacted statute extends this date. FISCAL EFFECT: According to the Assembly Appropriations Committee: 1)Costs to the DMHC in the range of $300,000 ongoing, and costs to CDI, not likely to exceed $50,000 ongoing, to review, SB 1010 Page 9 compile, and report on new rate filing information (Insurance Fund). 2)Unknown costs for enforcement of the reporting requirement on drug manufacturers by OSHPD (California Health Data and Planning Fund). Costs would depend on compliance, level of enforcement effort, and appeals. 3)Unknown potential information technology and staff costs for OSHPD to collect and collate additional data reports for publication on its web site (California Health Data and Planning Fund). 4)Unknown potential revenue from administrative penalties for noncompliance. COMMENTS: According to the author, the introduction of new and innovative drugs is vital to our health care system, but these often high-priced treatments come with a multitude of challenges. Drugs priced in excess of $10,000 are becoming common-place with little transparency for these astronomical price tags. This high-priced trend is a costly burden for patients, state programs, employers, and other payers, making it crucial that we understand what's behind the exploding prices. The public and policymakers need greater insight that will allow us to identify strategies to ensure prices do not threaten access to life-saving treatments. Additionally, data suggest that publically accessible price information in other sectors of the health care market encourage providers to offer more SB 1010 Page 10 competitive pricing and thereby reduce excess health spending. Transparency-focused policies, like those implemented by the federal Patient Protection and Affordable Care Act, have led to rules requiring hospitals in California to provide information on pricing for common surgeries, health plans to submit detailed data regarding premium changes, and doctors to report more information to the federal government. But, drug makers have been granted an exception to this forward-thinking trend. This bill will bring prescription drugs in line with the rest of the health care sector by shedding light on those drugs that are having the greatest impact on our health care dollar. This change is absolutely necessary in an environment where more than 900 drugs are sporting price-tags at or above $10,000 and new drugs with record-breaking prices are being released to address diseases that impact millions, including hundreds of thousands of patients in public programs like Medi-Cal. According to the June 2016 California HealthCare Foundation's (CHCF) Issue Brief, in 2015, the total United States (U.S.) expenditure on prescription medicines was $425 billion, a 12.2% increase over 2014 total expenditure or an 8.5% increase when adjusted for net expenditures. CHCF states that U.S. pharmaceutical prices are among the highest worldwide, and escalating costs have been a concern for many years, presenting challenges for federal, state, and private purchasers. Prescription drug spending is estimated to account for around 10% of overall health care costs, yet spending has been growing rapidly. Public and policymaker interest in addressing high and growing costs has piqued in recent years both by the introduction of new, innovative drugs at spectacular prices, such as the $84,000 Hepatitis C drug Sovaldi, as well as price increases of generic drugs, such as a 5,000% price increase in a decades-old drug called Daraprim. SB 1010 Page 11 Analysis Prepared by: Kristene Mapile / HEALTH / (916) 319-2097 FN: 0004372