BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    SB 1010


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          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         |                    |








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          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.








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          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;










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             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.










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          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.   








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               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:








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             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  








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            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,  








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            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  








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          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. 











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          Analysis Prepared by:                                             
                          Kristene Mapile / HEALTH / (916) 319-2097  FN:  
          0004372