BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Richard Alarcon, Chair
Date of Hearing: April 23, 2003 2003-2004 Regular
Session
Consultant: Liberty Reiter Sanchez Fiscal:No
Urgency:No
Bill No: SB 223
Author: Margett
Version: As Introduced February 13, 2003
Subject:
Workers' compensation: generic drugs
Purpose:
To extend the generic-drug-dispensing requirement,
currently imposed on pharmacies, to hospitals, clinics and
physicians, when filling workers' compensation
prescriptions.
Analysis:
Existing law requires pharmacies to provide the generic
equivalent of a name brand drug, when filling a workers'
compensation prescription, unless (1) there is no generic
drug equivalent available, or (2) the prescribing physician
has specifically provided otherwise in writing.
Self-insured employers and insurers are authorized under
current law to enter into contracts with pharmacies for
workers' compensation purposes. When such a contract is
entered into, employees that are subject to the contract
must be provided medicines and medical supplies in the
manner prescribed in the contract
Existing law also requires the Administrative Director (AD)
of the Division of Workers' Compensation to establish an
official pharmaceutical fee schedule by July 1, 2003.
This Bill , requires hospitals, clinics and physicians
providing medicines and medical supplies for workers'
compensation purposes to provide the generic drug
equivalent, if available, so long as the prescribing
physician does not specifically provide otherwise.
Staff Comments:
(1)The author seeks to close a loophole created in last
year's generic drug requirement
Legislation to ensure that such requirement is as
effective as possible. Existing law, imposes this
requirement on pharmacies, yet fails to impose the
requirement on other entities authorized to dispense
medicines.
(2)Physician Opt-Out:
While the author seeks to include physicians in the list
of those required to provide generics for workers'
compensation purposes, prescribing physicians under
current law, and under this bill, are authorized to
specify that the prescription, when filled, is not to be
a generic alternative. Accordingly, a prescribing
physician need only indicate in writing, each time he
writes a prescription, that a generic alternative is not
to be dispensed, in order to opt-out of this requirement.
Consequently, the impact on generic drug dispensing, as
a result of incorporating physicians into this
requirement, may be minimal.
(4) Provide vs. Dispense:
The author may wish to amend the bill to require that
generics be "dispensed" rather than "provided" by those
filling prescriptions. The requirement to "provide"
under existing law, and as expanded upon in this bill,
could be interpreted to mean that so long as the pharmacy
(hospital, clinic, physician) has the generic on hand,
and is thereby capable of "providing" the generic, that
they needn't actually dispense the generic when filling
the prescription.
Hearing Date: April 23, 2003 SB
223
Consultant: Liberty Reiter Sanchez
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Senate Committee on Labor and Industrial Relations
(5) Ensuring Applicability:
As the author seeks to ensure that the generic drug
requirement is applicable across the board, he may wish
to amend the bill to address the possibility that
entities other than pharmacies, hospitals, clinics and
physicians might be authorized, either now or in the
future, to dispense drugs for workers' compensation
purposes. Accordingly, the author may wish to amend his
bill to reflect the following language:
(A) Any person, who dispenses medicines and medical
supplies as required by Section 4600, shall dispense
the generic drug equivalent. Dispensing a generic
drug equivalent shall not be required under any of the
following circumstances:
(1) where a generic drug equivalent is unavailable;
or,
(2) where the prescribing physician specifically
provides in writing that a non-generic must be
dispensed.
(B) For purposes of this Section, "dispense" has the
same meaning as set forth in Section 4024 of the
Business & Professions Code.
(C) Nothing in this section shall be construed to
preclude a prescribing physician, who is also the
dispensing physician, from dispensing a generic drug
equivalent.
(6) Proponents :
Argue that inflation in the costs of pharmaceuticals has
outpaced that of health care alone and is the fastest
rising component of overall health care cost inflation in
the US economy. Moreover, a generic drug prescription
requirement is one of the only tools available in the
Hearing Date: April 23, 2003 SB
223
Consultant: Liberty Reiter Sanchez
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Senate Committee on Labor and Industrial Relations
workers' compensation health care arena, which can begin
to rein in the costs.
Proponents further contend that this measure is necessary
to ensure employers are able to fully realize, the
potential cost savings, of a generic drug requirement in
the workers' compensation system. They assert that
unless this loophole is closed true generic-drug cost
savings will never be achieved.
The County of Los Angeles Board of Supervisors asserts
that the County's risk management office estimates that
this bill could produce, an annual cost-savings in excess
of $200,000.
(7) Opponents :
Opponents of the bill, the California Applicants'
Attorneys Association, assert that the bill is
"unnecessary and can be addressed by the administrative
director in the pharmacy fee schedule."
(8) Prior and Related Legislation :
SB 228 (Alarc?n), of this year, currently before the
Senate Appropriations committee, contains a provision
requiring the AD to incorporate a pharmaceutical and
pharmacy services fee schedule into the official medical
fee schedule, and requires that such pharmaceutical and
pharmacy services fee schedule be based on Medi-Cal.
AB 749 (Calderon) [ Chapter 6, 2002], required that the
AD promulgate an official pharmaceutical fee schedule,
and imposed the requirement that pharmacies provide
generic drugs for workers' compensation prescriptions.
Support:
Agricultural Council of California -Support in Concept
Hearing Date: April 23, 2003 SB
223
Consultant: Liberty Reiter Sanchez
Page 4
Senate Committee on Labor and Industrial Relations
American Insurance Association
American International Group
Association of California Insurance Companies
Automotive Aftermarket Services Inc.
CA Agricultural Aircraft Association -Support in Concept
CA Assoc. of Nurseries & Garden Centers -Support in Concept
CA Beer and Beverage Distributors -Support in Concept
CA Citrus Mutual -Support in Concept
Ca Cotton Ginners Association -Support in Concept
CA Farm Bureau Federation -Support in Concept
CA Fig Institute -Support in Concept
CA Grocers Association -Support in Concept
CA Lodging Industry Association -Support in Concept
CA Plant Health Association -Support in Concept
CA Restaurant Association -Support in Concept
CA State Association of Counties -Support in Concept
CA Women for Agriculture -Support in Concept
California Association of Joint Powers Authority
California Chamber of Commerce
California Labor Federation, AFL-CIO
California Manufacturers and Technology Association
California Manufacturers and Technology Association
California Space Authority
California State Association of Counties (support in
concept)
Engineering and Utility Contractors Association
Golden State Builders Exchanges
Insurance Agents and Brokers Legislative Council
League of California Cities
League of California Cities -Support in Concept
Liberty Mutual Group
Los Angeles County Board of Supervisors
Milk Producers Council -Support in Concept
Murrieta Chamber of Commerce
Nat'l Federation of Independent Business -Support in
Concept
Orange County Business Council
Sacramento Metropolitan Chamber of Commerce
Western Growers Association -Support in Concept
Hearing Date: April 23, 2003 SB
223
Consultant: Liberty Reiter Sanchez
Page 5
Senate Committee on Labor and Industrial Relations
Opposition:
California Applicants' Attorneys Association
California Independent Public Employees Legislative Council
* * *
Hearing Date: April 23, 2003 SB
223
Consultant: Liberty Reiter Sanchez
Page 6
Senate Committee on Labor and Industrial Relations