Existing law authorizes the Department of General Services to enter into contracts on a bid or negotiated basis with manufacturers and suppliers of single source or multisource drugs and authorizes the department to obtain from them discounts, rebates, or refunds as permissible under federal law. Existing law authorizes the department, in consultation with specified state agencies, to investigate and implement other options and strategies to achieve the greatest savings on prescription drugs with prescription drug manufacturers and wholesalers, including, among others, coordinating programs offered by pharmaceutical manufacturers that provide prescription drugs for free or at reduced prices.

This bill would require the department, on or before February July 1, 2017, to submit a report to the appropriate policy and fiscal committees of the Legislature on activities that have been or will be undertaken pursuant to the above provisions. The bill would require the report to include specified information, such as the number and description of contracts entered into with manufacturers and suppliers of drugs, including any discounts, rebates, or refunds obtained. The bill would repeal the reporting requirement on January 1, 2021. The bill would also state the intent of the Legislature to enact future legislation that enacts strategies to achieve the greatest savings on prescription drugs with prescription drug manufacturers and wholesalers.

Existing law establishes the Office of Statewide Health Planning and Development within the California Health and Human Services Agency. Existing law places the office under the control of an executive officer known as the Director of Statewide Health Planning and Development. Existing law provides that the director is appointed by the Governor, subject to confirmation by the Senate, and holds office at the pleasure of the Governor.

This bill would make technical, nonsubstantive changes to that provision.

Date of Hearing: April 20, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 2711

Author:(Chiu) – As Amended Ver:April 6, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill:

1. Reinstates a previously repealed requirement for the Department of General Services (DGS) to report to the Legislature, by July 1, 2017 on its prescription drug bulk purchasing program.
2. Requires the report to include, but not be limited to, all of the following:
   1. The number and description of entities that participate in the program;
   2. The number and description of contracts with manufacturers and suppliers, including any discounts, rebates or refunds obtained;
   3. A description of other cost containment strategies that have been, or will be, implemented; and,
   4. Estimates of the costs and savings associated with the program.

FISCAL EFFECT:

One-time special fund costs to DGS of around $50,000.

(DGS cautions that, if the bill is interpreted to require DGS to disclose contract-by-contract detail on the discounts, rebates, and refunds obtained, the department anticipates that pharmaceutical suppliers would refuse to continue to provide preferential pricing to DGS, thus significantly increasing drug costs to participating state and local agencies.)

COMMENTS:

1. Background. SB 1315 (Sher), Chapter 483, Statutes of 2002, authorized DGS to administer and implement a prescription drug bulk purchasing program, also referred to as the statewide pharmaceutical program (SPP). The SPP allows state and local governmental entities to access contracts for pharmaceutical products and medical or surgical supplies. State prisons, state hospitals, and state developmental centers are required to purchase drugs through the SPP. Other participating agencies include California State University (CSU), California Highway Patrol, California Emergency Medical Services Authority, and the California Department of Veterans Affairs.

SB 1315 also directed DGS to report specific information about the SPP to the Legislature by February 1, 2005. In 2009, DGS sponsored legislation, AB 1311 (Duvall), Chapter 284, Statutes of 2009, that repealed reporting requirements it deemed unnecessary to operations, including the SPP report.

1. Purpose. According to the author, reinstating the report will provide "important and timely information necessary for the development of policies that will ensure access to affordable medications and deliver on the promise of health care coverage and affordability."

Analysis Prepared by: Chuck Nicol / APPR. / (916) 319-2081

Date of Hearing: March 30, 2016

ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW

Cristina Garcia, Chair

ABPCA Bill Id:AB 2711 (

Author:Chiu) – As Amended Ver:March 17, 2016

SUBJECT: Pharmaceuticals: purchasing

SUMMARY: Reinstates a previously repealed requirement for the Department of General Services (DGS) to report to the Legislature on its prescription drug bulk purchasing program. Specifically, this bill:

1. Expresses legislative intent to enact legislation that would include strategies to achieve the greatest savings on prescription drugs with prescription drug manufacturers and wholesalers.
   
2. Reinstates the repeal of a reporting requirement relating to DGS' prescription drug bulk purchasing program.
   
3. Requires the reinstated report to include, but not be limited to, all of the following:
   1. The number and description of entities that participate in the program;
   2. The number and description of contracts with manufacturers and suppliers, including any discounts, rebates or refunds obtained;
   3. A description of other cost containment strategies that have been, or will be, implemented; and,
   4. Estimates of the costs and savings associated with the program.
4. Requires DGS to provide the report to the appropriate fiscal and policy committees of the Legislature by February 1, 2017.
5. Sunsets the provisions of this bill on January 1, 2021.

EXISTING LAW:

1. Authorizes DGS to negotiate and contract with manufacturers and suppliers of prescription drugs in order to obtain discounts, rebates, or refunds based on quantities purchased.
2. Requires the California Department of Corrections and Rehabilitation, the Department of State Hospitals, and the Department of Developmental Services to participate in the prescription drug bulk purchasing program under the direction of DGS and allows other governmental entities to voluntarily participate.
3. Permits DGS to contract with a pharmaceutical benefits manager or other entity to negotiate prescription drug rebates and discounts for the state; purchase the drugs; or, act as a consultant to the department.
4. Provides that DGS may explore additional prescription drug cost containment strategies.
5. Repeals a requirement for DGS to report to the Legislature on the prescription drug bulk purchasing program.
   
6. Requires, in Government Code Section 10231.5, any bill that imposes a reporting requirement to include a sunset date.

FISCAL EFFECT: Unknown

COMMENTS: SB 1315 (Sher), Chapter 483, Statutes of 2002, authorizes DGS to administer and implement a prescription drug bulk purchasing program, also referred to as the statewide pharmaceutical program (SPP). The SPP allows state and local governmental entities to access contracts for pharmaceutical products and medical or surgical supplies. State prisons, state hospitals, and state developmental centers are required to purchase drugs through the SPP. Other participating agencies include California State University (CSU), California Highway Patrol, California Emergency Medical Services Authority, and the California Department of Veterans Affairs.

Under the SPP, DGS contracts with a vendor, AmeriSourceBergen Drug Corporation (ADC), to fill and distribute drug orders to participating departments. ADC acquires the drugs through competitively procured state contracts for generic drugs; negotiated state contracts for brand-name drugs; or, through the Massachusetts Alliance for State Pharmaceutical Buying, a group purchasing organization for states. Noncontract drugs are acquired at discounted wholesale prices.

SB 1315 also directed DGS to report specific information about the SPP to the Legislature by February 1, 2005. However, subsequent legislation, AB 79 (Dutra), Chapter 409, Statutes of 2004, established a moratorium on numerous legislative reporting requirements due to state budget constraints, including the SB 1315 report, and delayed its due date to January 1, 2008.

AB 2877 (Frommer), Chapter 720, Statutes of 2006, repealed the suspended SB 1315 report and instead required the information to be included in a new report to the Legislature on joint activities among DGS, the University of California, and the CSU regarding the procurement of prescription drugs. Finally, in 2009, DGS sponsored legislation, AB 1311 (Duvall), Chapter 284, Statutes of 2009, that repealed reporting requirements it deemed unnecessary to operations, including the SPP report.

According to the author, reinstating the report will provide "important and timely information necessary for the development of policies that will ensure access to affordable medications and deliver on the promise of health care coverage and affordability." By requiring information on the costs and savings associated with the SPP, the report could demonstrate whether the various participating entities have been able to leverage their collective buying power to achieve better pricing and more savings for the state.

SUGGESTED AMENDMENT: Committee staff recommends delaying the report due date to July 2017 to give DGS time to produce it.

REGISTERED SUPPORT / OPPOSITION:

Support
None on file
Opposition
None on file
Analysis Prepared by: Cassie Royce / A. & A.R. / (916) 319-3600