Existing law prohibits the allocation of state funds to any entity, whether public or private, for a drug- or alcohol-related program, unless the drug- or alcohol-related program contains a component that clearly explains in written materials that there shall be no unlawful use of drugs or alcohol.

This bill would make technical, nonsubstantive changes to these provisions.

ASSEMBLY THIRD READING

ATR Bill Id:AB 2486

Author:(McCarty and Gallagher)

As Amended Ver:March 23, 2018

Majority vote

SUMMARY: Requires that on or after January 1, 2020, contracts entered into under the Medi-Cal program between the California Department of Health Care Services (DHCS) and a manufacturer of single-source or multiple-source drugs that contain an active opioid ingredient, the manufacturer must, in addition to existing rebates under federal or state law, provide a state rebate of $0.01 per milligram of active opioid ingredients. Specifically, this bill:

1. Defines the following terms:
   1. Opioid as an opiate or any synthetic or semisynthetic narcotic that has opiate-like activities but is not derived from opium and has effects similar to natural opioid alkaloids and any derivatives thereof; and,
   2. Opiate as the dried, condensed juice of a poppy, Papaver somniferum, that has a narcotic, soporific, analgesic, and astringent effect.
2. Requires the manufacturer to make a state rebate payment to DHCS proportional to the utilization of prescription drugs provided by the manufacturer that contain active opioid ingredients at a rate of $0.01 per milligram of active opioid ingredient.
3. Requires the determination of prescription drug utilization to be based on the utilization data DHCS prepares for purposes of the existing state rebate.
4. Authorizes DHCS to enter into a contract with a manufacturer without providing for the state rebate described in this bill provided that the prescription drugs that contain an active opioid ingredient will be made available only through prior authorization, to the extent that prior authorization requirements are consistent with federal Medicaid Program provisions. Establishes that this bill only applies to new contracts, and renewals of existing contracts entered into by DHCS and a manufacturer on or after January 1, 2020.
5. Requires DHCS in consultation with the California Department of Public Health (DPH) and subject to appropriation by the Legislature to distribute moneys in the Fund to counties, on an annual basis for purposes of opioid prevention and rehabilitation programs.
6. Requires distribution of moneys in the Fund to counties to be based on county needs, using the most recent data of only the following information, as provided by DPH:
   1. The ratio of opioid overdose deaths per county population;
   2. The ratio of opioid overdose emergency department visits per county population; and,
   3. The ratio of opioid overdose hospitalizations per county population.
7. Establishes within the State Treasury the Medi-Cal Opioid Prevention and Rehabilitation Program Fund (Fund) to deposit proceeds of rebates collected under this bill.

FISCAL EFFECT: According to the Assembly Appropriations Committee:

1. Minor administrative costs to DHCS to develop rebate contracts that reflect the new requirements (General Fund (GF)/federal).
2. The fiscal effect of this bill depends upon the reaction of drug manufacturers to the new contractual requirement. The possible scenarios are as follows:
   1. If manufacturers refuse to contract, their drugs will be placed on a prior authorization list and DHCS will incur significant staff costs to review treatment authorization requests. For instance, if five pharmacy consultants were needed, the bill's cost would be about $1 million annually (about 75% federal, 25% GF).
   2. If manufacturers all contract, unknown revenue, potentially in the millions of dollars (Medi-Cal Opioid Prevention and Rehabilitation Program Fund).
   3. If some contract and some do not, the net fiscal benefit could be positive or negative, depending on the balance.

DHCS projects manufacturers will not seek contracts if the bill goes into effect and therefore the bill will cost more to implement than the revenue it would generate.

COMMENTS: According to the author, the opioid epidemic is an ongoing and growing problem that desperately needs assistance for both prevention and treatment. The funding that will be generated from this small surcharge on opioids could help fill the funding gap for prevention and treatment centers in order to save lives. The money collected will be administered at the county level and will be distributed based on need and population. The lack of available funds, treatment centers and options for individuals suffering from opioid use disorder is contributing to the death toll, and this bill seeks to address the lack of funding for rehabilitation and educational campaigns to inform the public on the risks of opioid misuse. In particular, the goal is to expand current service so that programs are able to keep pace with the demand for treatment. The author concludes by stating that dealing with the opioid epidemic requires a holistic approach and participation from all involved parties, including drug manufacturers.

There is no known support or opposition for this bill.

Analysis Prepared by: Judith Babcock / HEALTH / (916) 319-2097 FN: 0003276

Date of Hearing: May 9, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 2486

Author:(McCarty) – As Amended Ver:March 23, 2018

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

SUMMARY:

This bill requires a contract entered into by the Department of Health Care Services (DHCS) and a drug manufacturer, for a prescription drug that contains an active opioid ingredient, to provide a state rebate of one cent ($0.01) per milligram of active opioid ingredient.

It also creates the Medi-Cal Opioid Prevention and Rehabilitation Program Fund and makes revenue generated by rebates, less administrative costs, available upon appropriation to counties for opioid prevention and rehabilitation programs.

FISCAL EFFECT:

1. Minor administrative costs to DHCS to develop rebate contracts that reflect the new requirements (GF/federal).
2. The fiscal effect of this bill depends upon the reaction of drug manufacturers to the new contractual requirement. The possible scenarios are as follows:
   1. If manufacturers refuse to contract, their drugs will be placed on a prior authorization list and DHCS will incur significant staff costs to review treatment authorization requests. For instance, if five pharmacy consultants were needed, the bill's cost would be about $1 million annually (about 75% federal, 25% GF).
   2. If manufacturers all contract, unknown revenue, potentially in the millions of dollars (Medi-Cal Opioid Prevention and Rehabilitation Program Fund).
   3. If some contract and some do not, the net fiscal benefit could be positive or negative, depending on the balance.

DHCS projects manufacturers will not seek contracts if the bill goes into effect and therefore the bill will cost more to implement than the revenue it would generate.

COMMENTS:

1. Purpose. This bill seeks to raise funds for opioid prevention and rehabilitation programs by requiring state rebates for drugs purchased through Medi-Cal.
2. Background. Opioid medications have a recognized medical use, but also have a high potential for abuse that may lead to severe psychological dependence or severe physical dependence. The state and nation are in the midst of an opioid addiction crisis. In 2016, DPH reported 2,031 opioid deaths in California due to opioid overdose.

Most people enrolled in Medi-Cal receive care through managed care plans, but the state also administers a sizable fee-for-service (FFS) Medi-Cal program. DHCS negotiates with drug manufacturers and maintains a contract drug list for use in FFS Medi-Cal. Generally, prescription drugs on the list are not subject to prior authorization (in other words, patients can access the drugs without specific approval from the department). Medicaid programs receive federally required prescription drug rebates and can also negotiate supplemental rebates at the state level. According to DHCS, 11 opioid products approved for treatment of pain are on the Medi-Cal contracted drug list; none has a contracted supplemental rebate. For fiscal year 2016-2017, only one opioid product, Suboxone (approved for the treatment of substance use disorders – not pain), had a state supplemental rebate contract.

1. Related Legislation. There is a large number of bills introduced this year addressing various aspects of the opioid epidemic, including improvements to CURES, limits on opioid prescribing, higher reimbursement for drug treatment providers, and improved access to naloxone, which can prevent death from overdose.
2. Prior Legislation. AB 1512 (McCarty), of the current session, would have imposed a tax of $0.01 per milligram on the distribution of opioids and required the amounts collected to be used for addiction prevention and rehabilitation programs. AB 1512 was referred to the Assembly Revenue and Taxation Committee, where testimony was taken but no further action was taken on the bill.

Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081

Date of Hearing: April 24, 2018

ASSEMBLY COMMITTEE ON HEALTH

Jim Wood, Chair

ABPCA Bill Id:AB 2486

Author:(McCarty) – As Amended Ver:March 23, 2018

SUBJECT: Medi-Cal Opioid Prevention and Rehabilitation Act.

SUMMARY: Requires that contracts that the California Department of Health Services (DHCS) enters into with a manufacturer of single-source or multiple-source drugs under the Medi-Cal Program that includes a prescription drug containing an active opioid ingredient to provide in addition to existing rebates under federal or state law, a state rebate of $0.01 per milligram of active opioid ingredients. Specifically, this bill:

1. Requires a contract entered into by DHCS on and after January 1, 2020, except as specified, with a manufacturer of single-source or multiple-source drugs under the Medi-Cal programs that includes a prescription drug that contains an active opioid ingredient, to provide for a state rebate in addition to existing rebates required in state and federal law.
2. Defines the following terms:
   1. Opioid as an opiate or any synthetic or semisynthetic narcotic that has opiate-like activities but is not derived from opium and has effects similar to natural opioid alkaloids and any derivatives thereof; and,
   2. Opiate as the dried, condensed juice of a poppy, Papaver somniferum, that has a narcotic, soporific, analgesic, and astringent effect.
3. Requires the manufacturer to make a state rebate payment to DHCS proportional to the utilization of prescription drugs provided by the manufacturer that contain active opioid ingredients at a rate of $0.01 per milligram of active opioid ingredient.
4. Requires the determination of prescription drug utilization to be based on the utilization data DHCS prepares for purposes of the existing state rebate.
5. Authorizes DHCS to enter into a contract with a manufacturer without providing for the state rebate described in this bill provided that the prescription drugs that contain an active opioid ingredient will be made available only through prior authorization, to the extent that prior authorization requirements are consistent with federal Medicaid Program provisions. Establishes that this bill only applies to new contracts, and renewals of existing contracts entered into by DHCS and a manufacturer on or after January 1, 2020.
6. Requires DHCS in consultation with the California Department of Public Health (DPH) and subject to appropriation by the Legislature to distribute moneys in the Fund to counties, on an annual basis for purposes of opioid prevention and rehabilitation programs.
7. Requires distribution of moneys in the Fund to counties to be based on county needs, using the most recent data of only the following information, as provided by DPH:
   1. The ratio of opioid overdose deaths per county population;
   2. The ratio of opioid overdose emergency department visits per county population; and,
   3. The ratio of opioid overdose hospitalizations per county population.
8. Establishes within the State Treasury the Medi-Cal Opioid Prevention and Rehabilitation Program Fund (Fund) to deposit proceeds of rebates collected under this bill.

EXISTING LAW:

1. Establishes the Medi-Cal program, administered by DHCS which provides health benefits, to low-income individuals who meet specific eligibility criteria.
2. Provides for a schedule of benefits under the Medi-Cal program, which includes prescribed drugs subject to the Medi-Cal list of contract drugs.
3. Authorizes DHCS to enter into contracts with manufacturers of single-source and multiple-source drugs for drugs from each major therapeutic category.
4. Requires DHCS and manufacturer contracts to provide for a state rebate to be remitted to DHCS quarterly.
5. Requires that the utilization data used to determine state rebates to include data from all programs, including but not limited to fee-for-service Medi-Cal and utilization data from health plans contracting with the department to provide services to Medi-Cal beneficiaries as specified.
6. Defines several terms including the following:
   1. State Rebate as the amount negotiated between the manufacturer and DHCS for reimbursement by the manufacturers, as specified in the contract, in addition to the Medicaid rebate;
   2. Manufacturer as any person, partnership, corporation or other institution or entity that is engaged in the production, preparation, propagation, compounding, conversion, or processing of drugs, either directly or indirectly by extraction from substances of natural origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis, or in the packaging, repacking, labeling, relabeling and distribution of drugs;
   3. Single-Source Drug as a drug that is produced and distributed under an original New Drug Application approved by the Federal Food and Drug Administration (FDA); and,
   4. Multiple-Source Drug, for a rebate period, as a covered outpatient drug for which there is at least one other drug product which meets criteria as specified.
7. Establishes DPH to, among other functions, protect the public's health, achieve positive health outcomes for individuals, families and communities, improve access to quality public health services, and provide education in areas of critical public health concern.
8. Tasks DPH with certain specified duties related to health information and strategic planning including opioid misuse and overdose prevention

FISCAL EFFECT: This bill has not yet been analyzed by a fiscal committee.

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, the opioid epidemic is an ongoing and growing problem that desperately needs assistance for both prevention and treatment. The funding that will be generated from this small surcharge on opioids could help fill the funding gap for prevention and treatment centers in order to save lives. The money collected will be administered at the county level and will be distributed based on need and population. The lack of available funds, treatment centers and options for individuals suffering from opioid use disorder is contributing to the death toll, and this bill seeks to address the lack of funding for rehabilitation and educational campaigns to inform the public on the risks of opioid misuse. In particular, the goal is to expand current service so that programs are able to keep pace with the demand for treatment. The author concludes by stating that dealing with the opioid epidemic requires a holistic approach and participation from all involved parties, including drug manufacturers.
2. BACKGROUND.
   1. Opioid Epidemic. Opioids are a class of narcotic drugs that include medications such as hydrocodone, oxycodone, morphine, codeine, and other related drugs. Most opioid analgesics are classified at Schedule II drugs in the California Uniform Controlled Substances Act, in that they have a recognized medical use, but also have a high potential for abuse that may lead to severe psychological dependence or severe physical dependence. According to DPH, in the past, prescription opioids were prescribed for relieving short-tem (acute) pain. Today, they are increasingly being used for long-term (chronic) pain management. As a result, sales of opioid pain relievers have quadrupled in the past 10 years. Taken as prescribed, opioids can be used to manage pain safely and effectively. However, opioids may also produce other effects including euphoric response since these drugs affect the regions of the brain involving reward response. The National Institute on Drug Abuse states that those who abuse opioids may seek to intensify their experience by taking the drug in ways other than those prescribed such as snorting or injecting, thereby increasing their risk for serious medical complications, including overdose. Prescription opioid misuse can lead to long-term health problems, trouble breathing, overdose, and death.
      
      In 2016 DPH reported 2,031 opioid deaths in California with 4,623 emergency department (ED) visits for all opioids (excluding heroin). Deaths as a result of Fentanyl increased to 237 in 2016 and there were more than 23.6 million opioid prescriptions issued in the State of California.

As part of monitoring the Opioid Epidemic, DPH in collaboration with the Office of Statewide Health Planning and Development, the Department of Justice, and the California Health Care Foundation, collects data related to the number of ED visits, opioid overdoses, opioid related deaths prescriptions dispensed, and total milligram doses authorized. This information is provided for the state as a whole or broken down county by county. The information is available on the California Opioid Overdose Surveillance Dashboard.

b) Medi-Cal Rebate Programs. The Medi-Cal program has two primary rebate programs:

• • 1. Medicaid Drug Rebate Program (MDRP). Created by the Omnibus Budget Reconciliation Act of 1990, the MDRP allows DHCS to obtain price discounts for drugs. MDRP helps lower Medicaid spending on outpatient prescription drugs. MDRP is a mandatory program that all drug manufacturers must enter into in order to obtain Medicaid coverage for their FDA-approved drugs covered by Medicaid programs. In California, this rebate applies to utilization occurring in all Medi-Cal delivery systems. The amount of rebate due for each unit of a drug is based on statutory formulas. In state fiscal year 2016-17, total state expenditures for prescription drugs equaled $3.2 billion. The rebates provided to the state equaled $925.6 million for both fee-for-service (including county organized health system plans) and managed care organizations (MCO). Invoicing for drug rebates under MDRP began on January 1, 1991 and continues through today.
    2. State Supplemental Rebates (SSR). SSRs are additional rebates drug manufacturers have agreed to pay the state. SSR are based on the same utilization as the federal rebate program.  Participation in the SSR program is voluntary. Drug manufacturers that have agreed to pay supplemental rebates are included on the State’s Contract Drug List (CDL).  Generally, prescription drugs on CDL are not subject to prior authorization.  The Pharmacy Benefit’s Drug Contracting Branch within DHCS.is responsible for managing the program and negotiating contracts.   Supplemental rebates have been part of the California rebate program since 1991.  SSR contracts pertain to all rebate programs except for MCOs. Prior to 1997, supplemental rebates were calculated as a percentage of Average Manufacturer Price (AMP) on all covered drugs.  However since 1997, contracts are negotiated on specific drugs. California currently has two types of supplemental contracts: Net Cost and AMP.  In state fiscal year 2016-17, total state expenditures for prescription drugs equaled $3.2 billion. The SSR for 2016-17 was $22.2 million.
  1. Other States. This bill intends to generate revenue for the education, prevention and of substance use disorders acquired through use or misuse of opioids. New York and Minnesota are examples of two other states that have undertaken efforts to provide new sources of funding for opioid related education and treatment.
     1. New York Opioid Stewardship Fund (OSF). New York’s final budget established an OSF which imposed a “stewardship payment” on manufacturers and distributors that sell or distribute opioids in New York. The total opioid stewardship payment is $100 million annually, and each manufacturer and distributor that sells or distributes opioids in New York will pay a portion of the total opioid payment amount based on that manufacturer’s or distributor’s share of the total morphine milligram equivalents (mme) sold or distributed during the preceding year as reported by the manufacturer or distributors. OSF will be used to support programs for opioid treatment, recovery, prevention, education and the New York prescription drug monitoring program, I-STOP.
     2. Minnesota Opioid Stewardship Program (OSP). The Governor of Minnesota recently proposed an opioid Action Plan part of which includes an OSP to fund opioid abuse prevention and treatment strategies throughout Minnesota. The OSP requires that opioid manufacturers pay a stewardship fee to fund a comprehensive prevention, treatment, and recovery effort that would curb opioid abuse and save lives. The OSP requires manufacturers to pay a base-level of $0.01 stewardship fee for each unit of drug dispensed. This fee would increase for some of the more potent opioids. It is estimated to raise approximately $20 million a year.

3) RELATED LEGISLATION.

• 1. AB 1963 (Waldron) increases Medi-Cal reimbursement rates for providers who prescribe medication assisted drug treatments. AB 1963 is pending in the Assembly Appropriations Committee.
  2. AB 2174 (Waldron) establishes the Heroin and Opioid Public Education Act which requires DPH, upon appropriation by the Legislature or receipt of adequate state or federal grant funding, and in consultation with stakeholders as appropriate, to develop, coordinate, implement and oversee a comprehensive multicultural public awareness campaign, designed to combat the growing heroin and opioid medication epidemic in the state. AB 2174 is pending on the Assembly Appropriations Committee Suspense File.
  3. AB 2256 (Santiago) authorizes a pharmacy or wholesaler to furnish naloxone hydrochloride or other opioid antagonists to law enforcement agencies, under specified conditions. AB 2256 is pending in the Assembly Public Safety Committee.
  4. AB 2384 (Arambula) requires that drug formularies maintained by healthcare service plans, including Medi-Cal, or health insurers include specified prescription drugs for medication assisted treatment (MAT) and provides that MAT is presumed to be medically necessary and not subject to specified requirements including prior authorization and an annual or lifetime dollar limit. AB 2384 is pending in the Assembly Health Committee.
  5. AB 2741 (Burke) limits all opioid prescriptions for minors to a maximum of five days and requires a prescriber to discuss risks related to opioid medication with the minor and the minor’s parent or guardian and obtain written consent prior to writing the prescription. AB 2741 is pending in the Assembly Appropriations Committee.
  6. AB 2760 (Wood) requires prescribers to co-prescribe naloxone when prescribed to patients who are identified to be in risk categories as defined. AB 2760 is pending in the Assembly Appropriations Committee.
  7. SB 1109 (Bates) requires: i) existing continuing education courses for all prescribers to include the risks of addiction and overdose; ii) a warning label on all Schedule II controlled substances prescription bottles on the associated addiction and overdose risks; iii) a minor’s and a parent’s or guardian’s signature after a required consultation with a prescriber for any minor receiving an initial opioid prescription; and, iv) an information sheet on the risks of opioids to be signed by a minor athlete and the minor athlete’s parent or guardian before participation in organized team sports. SB 1109 is pending in the Senate Health Committee.

1. PREVIOUS LEGISLATION. AB 1512 (McCarty) of 2017, would have imposed a tax of $0.01 per milligram on the distribution of opioids and required the amounts collected to be used for addiction prevention and rehabilitation programs. AB 1512 was held in Assembly Tax & Revenue Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

None of file.

Opposition

None on file.

Analysis Prepared by: Judith Babcock / HEALTH / (916) 319-2097