BILL ANALYSIS
AB 1960
Page 1
ASSEMBLY THIRD READING
AB 1960 (Pavley)
As Amended May 20, 2004
Majority vote
HEALTH 13-5 BUSINESS AND PROFESSIONS 8-3
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|Ayes:|Cohn, Chan, Chavez, |Ayes:|Bermudez, Corbett, |
| |Dymally, Frommer, Koretz, | |Koretz, Leno, Nation, |
| |Lieber, Montanez, Nakano, | |Negrete McLeod, Vargas, |
| |Negrete McLeod, Jackson, | |Yee |
| |Salinas, Wolk | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Spitzer, Dutton, |Nays:|Correa, Aghazarian, Maze |
| |Nakanishi, Plescia, | | |
| |Richman | | |
| | | | |
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APPROPRIATIONS 16-0
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|Ayes:|Chu, Berg, Calderon, |
| |Corbett, Correa, |
| |Firebaugh, Goldberg, |
| |Leno, Nation, Negrete |
| |McLeod, Oropeza, Pavley, |
| |Ridley-Thomas, Wesson, |
| |Wiggins, Yee |
| | |
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SUMMARY : Requires pharmacy benefit managers (PBMs) to make
various disclosures to purchasers and prospective purchasers of
PBM services. Requires PBM contracts to include certain
provisions. Prohibits PBMs from substituting medications in
specified situations. Specifically, this bill :
1)Requires a PBM to disclose to the purchaser of its services
all of the following:
a) The amount of rebates, other retrospective utilization
discounts, and all other revenue that the PBM receives from
pharmaceutical manufacturers or labelers in connection with
the purchaser's prescription drug benefits;
AB 1960
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b) Prescription drug utilization information, as specified;
c) Any fees charged by PBM to the purchaser;
d) The credentials of members of any pharmacy and
therapeutics (P&T) committee and any financial
relationships between committee members and the
pharmaceutical industry; and,
e) Any arrangements with providers, medical groups,
individual practice associations, pharmacists, or other
entities that are associated with activities of PBM to
encourage formulary compliance or otherwise manage
prescription drug benefits.
2)Requires a PBM to disclose to a prospective purchaser all of
the following:
a) The estimated amount of rebates, other retrospective
utilization discounts, and all other revenue that PBM
receives from pharmaceutical manufacturers or labelers in
connection with the prospective purchaser's prescription
drug benefits;
b) Any fees charged by PBM to the prospective purchaser;
c) The credentials of members of any P&T committee and any
financial relationships between committee members and the
pharmaceutical industry; and,
d) Any arrangements with providers, medical groups,
individual practice associations, pharmacists, or other
entities that are associated with activities of PBM to
encourage formulary compliance or otherwise manage
prescription drug benefits.
3)Permits a PBM to withhold the disclosures required by #1) and
#2) above if the purchaser or prospective purchaser does not
agree to maintain the confidentiality of the disclosed
information.
4)Prohibits a PBM from executing a contract that fails to
address specific items.
AB 1960
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5)Requires all members of a PBM P&T committee to be physicians,
pharmacists, or other health care professionals, and a
majority of committee members to be actively practicing and
not employed by PBM.
6)Requires a PBM to report not less than quarterly to the P&T
committee the effects of medication substitutions on the
health of patients.
7)Prohibits PBMs from substituting a medication for another
currently prescribed medication without first obtaining
express verifiable authorization from the prescriber of the
currently prescribed drug except as specified. Prohibits such
substitutions unless PBM provides the patient or their
representative specified information.
8)Requires PBMs to assure that a patient does not incur any
additional costs if either the prescriber or the patient
instructs the PBM to reverse or cease the substitution and if
the currently prescribed medication remains on the formulary.
9)Requires a PBM to maintain a toll-free telephone number that
is known to prescribers and patients.
10) Defines for purposes of this bill the following terms:
"labeler," "pharmacy benefits management," "pharmacy benefit
manager," "prospective purchaser," and "purchaser."
FISCAL EFFECT : Unknown
COMMENTS : PBMs are independent specialty administrators; they
focus on administering pharmacy benefits, and managing the
purchasing, dispensing, and reimbursing of prescription drugs.
According to the California Healthcare Foundation, about 45% of
the United States population has pharmacy coverage provided
directly by a PBM. PBM market is highly concentrated with the
four largest firms holding a combined 80% market share.
According to the author, this bill is needed to create consumer
protection guidelines that PBMs must meet when doing business
with California clients such as CalPERS, large employers, health
plans, and union trust funds. The author believes that creating
a more transparent market will shine a light on an industry that
discloses an inadequate amount of pricing and conflict of
AB 1960
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interest information and will enable purchasers of PBM services
to make informed decisions about the type of prescriptions and
benefits they select on behalf of their enrollees. According to
the author, this will allow clients to take full advantage of
the free market by incentivizing PBMs to compete in a fair,
transparent environment for California business.
For additional commentary related to this bill see the policy
committee analyses.
Analysis Prepared by : John Gilman / HEALTH / (916) 319-2097
FN: 0005861