BILL ANALYSIS
AB 1960
Page 1
GOVERNOR'S VETO
AB 1960 (Pavley)
As Amended August 19, 2004
2/3 vote
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|ASSEMBLY: |50-26|(May 26, 2004) |SENATE: |23-15|(August 24, |
| | | | | |2004) |
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|ASSEMBLY: |49-29|(August 25, | | | |
| | |2004) | | | |
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Original Committee Reference: HEALTH
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.
The Senate amendments :
1)Relocate the provisions of this bill to the Health and Safety
Code.
2)Delete the requirement for PBMs to disclose to purchasers and
potential purchasers the credentials of members of any
pharmacy and therapeutic (P & T) committee and any direct or
indirect financial relationships between committee members and
the pharmaceutical industry.
3)Prohibit a P & T committee member from being an officer,
employee, director, or agent of, or any person who has
financial interest in, pharmaceutical companies. Exempts from
this prohibition the ownership of stock from open market
purchases of less than a nominal amount of the outstanding
stock of pharmaceutical companies.
AB 1960
Page 2
4)Permit academics to serve on P & T committees.
5)Require all disclosures made pursuant to this bill to comply
with the privacy standards of the federal Health Insurance
Portability and Accountability Act.
6)Make numerous non-substantive drafting changes.
FISCAL EFFECT : According to the Assembly Appropriations
Committee analysis:
1)Unknown state GF costs or savings, depending upon whether
disclosure requirements lead to higher or lower prescription
drug prices. The state currently contracts with two PBMs (for
the AIDS Drug Assistance Program and for CalPERS enrollees in
two self-funded plans).
2)Indeterminate costs to state-contracting PBMs by prohibiting a
PBM from limiting or excluding coverage for a drug for an
enrollee if the drug previously had been approved for coverage
by the PBM for a medical condition of a patient.
AS PASSED BY THE ASSEMBLY , this bill required PBMs to make
various disclosures to purchasers and prospective purchasers,
required PBM contracts to include certain provisions and
prohibited PBMs from substituting medications in specified
situations.
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
United States (U.S.) residents have pharmacy coverage provided
directly by a PBM. The 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 prescription drugs 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.
GOVERNOR'S VETO MESSAGE :
"I share the author's concerns with the rising cost of
prescription drugs and generally, her interest in disclosure of
information to consumers. However, this measure would have the
unintended consequence of increasing drug costs to health
plans, the Medi-Cal Program and other purchasers, without
providing any real consumer benefit. Studies, including one
from the Federal Trade Commission, have shown that enactment of
this legislation will limit competition and significantly
increase the cost of prescription drugs."
Analysis Prepared by: John Gilman / HEALTH / (916) 319-2097
FN: 0009270