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
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|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
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| | | | |
| | | | |
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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