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AB-587 State government: pharmaceuticals: procurement: collaborative.(2017-2018)

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Date Published: 07/12/2017 09:00 PM
AB587:v95#DOCUMENT

Amended  IN  Senate  July 12, 2017
Amended  IN  Assembly  May 30, 2017
Amended  IN  Assembly  April 18, 2017
Amended  IN  Assembly  March 30, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 587


Introduced by Assembly Member Chiu

February 14, 2017


An act to repeal and add Chapter 12 (commencing with Section 14977) of Part 5.5 of Division 3 of Title 2 of the Government Code, relating to state government.


LEGISLATIVE COUNSEL'S DIGEST


AB 587, as amended, Chiu. State government: pharmaceuticals: procurement: collaborative.
Existing law requires specified state agencies to participate in a prescription drug bulk purchasing program, authorizes the Department of General Services to enter into exclusive or nonexclusive contracts on a bid or negotiated basis with manufacturers and suppliers of single-source or multisource drugs and to obtain from those manufacturers and suppliers discounts, rebates, or refunds based on quantities purchased insofar as permissible under federal law, and authorizes the department to appoint and contract with a pharmaceutical benefits manager, as specified. Existing law authorizes the Department of General Services to explore additional strategies for managing prescription drug costs and investigate and implement those strategies in consultation with other specified state agencies.
This bill would revise these provisions and instead require the department to convene the California Pharmaceutical Collaborative cochaired by the Deputy Director of the Procurement Division of the department and the Assistant Secretary of California Health and Human Services to address the rising cost of pharmaceuticals. The bill would require the Department of Corrections and Rehabilitation, the Department of Veterans Affairs, the California Health and Human Services Agency, the Department of Finance, the Government Operations Agency, and the Labor and Workforce Development Agency, among other entities, to each appoint a representative to the collaborative and to participate as members. The bill would also require the Speaker of the Assembly and the President pro Tempore of the Senate each to appoint one member to the collaborative.
The bill would require the collaborative to perform specified functions, including, among other things, coordinating best value clinical treatment protocols among members of the collaborative, leveraging state and local governmental efficiencies and methodologies to achieve best value procurement, purchasing, and negotiating with manufacturers for discounts on pharmaceuticals, and acting as a forum for discussion where issues of interest related to pharmaceuticals can be identified and addressed. The bill would authorize the Department of General Services to contract with manufacturers and suppliers of pharmaceuticals and to appoint and contract with a pharmaceutical benefits manager, as specified. The bill would require the State Department of State Hospitals, the Department of Corrections and Rehabilitation, and the State Department of Developmental Services to participate in the prescription drug bulk purchasing program authorized by these provisions and permit any state, district, county, city, municipal, or public agency governmental entity to elect to participate in the coordinated purchasing program. The bill would require the Department of General Services, on or before July 1, 2018, and annually until 2022, to submit a report to the appropriate policy and fiscal committees of the Legislature on the activities of the collaborative, including the number, and a description, of the contracts entered into with pharmaceutical benefits managers or other pharmaceutical drug purchasing agents, the number and a description of entities that elect to participate in pharmaceutical purchasing coordinated by the collaborative, other options and strategies that have been or will be undertaken by the collaborative, the progress made with regard to the investigation and implementation of options and strategies to achieve the greatest savings on pharmaceuticals, and the estimated cost savings attributable to activities that have been or will be undertaken by the collaborative.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) Despite prior legislative attempts to encourage the participation of state and local entities in a bulk purchasing program aimed at lowering government expenses, pharmaceutical drug prices are skyrocketing, and state and local spending on these drugs is increasing.
(b) This act is intended to improve the situation by revising the organizational framework so as to better facilitate the cooperation of state and local agencies to reduce the costs of pharmaceuticals they purchase.
(c) Both state and local entities will benefit from a collaboration to track high-cost pharmaceuticals, achieve best value in procurement and pricing of pharmaceuticals, identify important issues related to prescription drug pricing and procurement, and increase the Department of General Services’ purchasing power.

SEC. 2.

 Chapter 12 (commencing with Section 14977) of Part 5.5 of Division 3 of Title 2 of the Government Code is repealed.

SEC. 3.

 Chapter 12 (commencing with Section 14977) is added to Part 5.5 of Division 3 of Title 2 of the Government Code, to read:
CHAPTER  12. The California Pharmaceutical Collaborative

14977.
 (a) The Department of General Services shall convene the California Pharmaceutical Collaborative pursuant to this chapter to address the rising cost of pharmaceutical drugs.
(b) The collaborative shall be cochaired by the Deputy Director of the Procurement Division of the Department of General Services and the Assistant Secretary of California Health and Human Services.
(c) The activities of the collaborative shall be coordinated by the Pharmaceutical Acquisitions Section of the Procurement Division of the Department of General Services in partnership with the Assistant Secretary of California Health and Human Services.
(d) The collaborative shall meet at least twice per year.

14977.1.
 The mission of the collaborative shall be to coordinate the efforts of state and local government entities to identify and implement opportunities for cost savings with regard to the purchase of pharmaceuticals, particularly pharmaceuticals that are considered high-cost drugs.

14977.2.
 (a) The following agencies shall be members of, and shall each appoint a representative to, the collaborative:
(1) The Department of Corrections and Rehabilitation.
(2) The Department of Veterans Affairs.
(3) The California Health and Human Services Agency.
(4) The Department of Finance.
(5) The Government Operations Agency.
(6) The Labor and Workforce Development Agency.
(7) California Correctional Health Care Services.
(8) The State Department of Industrial Relations.
(9) The State Department of Public Health.
(10) The California Public Employees’ Retirement System, upon the agreement of the Board of Administration of the Public Employees’ Retirement System.
(11) The California State Association of Counties.
(12) The Trustees of the California State University.
(13) Covered California, upon the agreement of the executive board of Covered California.
(14) The State Department of Developmental Services.
(15) The Department of General Services.
(16) The State Department of Health Care Services.
(17) The Department of Managed Health Care.
(18) The State Department of State Hospitals.
(19) The Regents of the University of California, upon the agreement of the regents.
(b) The Speaker of the Assembly and the President pro Tempore of the Senate shall each appoint a representative to the collaborative.
(c) Other state or local government agencies may also appoint a representative to the collaborative.

14977.3.
 (a) The collaborative shall perform all of the following functions:
(1) Coordinate best value clinical treatment protocols among members of the collaborative.
(2) Leverage state and local governmental efficiencies and methodologies to achieve best value procurement, purchasing, and negotiation with manufacturers for discounts on pharmaceuticals.
(3) Investigate and implement options and strategies to achieve the greatest savings on pharmaceuticals, including all of the following:
(A) Encourage collaborative members to develop and adopt the state’s Common Drug Formulary overseen by the Department of General Services.
(B) Obtain the maximum transparency possible in administering the formulary, including all forms of rebates, mail order income, and spreads.
(C) Join other state pharmaceutical purchasing programs in a consortium that is open to other private and public purchasers of pharmaceuticals.
(D) Join an independent association that produces comparative effectiveness research on pharmaceuticals using systematic reviews of scientific or medical studies that use clinical trials and are subject to peer review. The association’s investigators shall comply with a conflict of interest conflict-of-interest policy that includes a formal, annual, written, self-declaration of no financial interest in any pharmaceutical company for at least the duration of the time that the person is working for the association.
(E) Obtain access to the drug discount program established under Section 340B of the federal Public Health Service Act (42 U.S.C. Sec. 256b).
(4) Establish and monitor performance and quality standards for protocols, guidelines, and contracts created for collaborative members.
(5) Work with collaborative members to track access to and state expenditures on specified high-cost drugs to inform the budget process.
(6) Recommend high-cost pharmaceuticals for cost value review by independent research organizations.
(7) Track new pharmaceuticals that are under review by the federal Food and Drug Administration, drugs that are likely to come on to the market in the near future, and drugs that may become high cost.
(8) Act as a forum for discussion where issues of interest related to pharmaceuticals can be identified and addressed.
(9) Collect information on drugs approved by the FDA that will be sold and used by members of the collaborative.
(b) Nothing in this section shall be construed to require sharing of information that is prohibited by any other provision of law or contractual agreement, or the disclosure of information that may adversely affect potential pharmaceutical procurement by any state agency.

14977.4.
 The collaborative shall form several workgroups in service of its goals that shall meet at least quarterly. The cochairpersons of the collaborative shall meet with the workgroup leads monthly. The workgroups formed shall include all of the following:
(a) A clinical workgroup.
(b) A policy workgroup.
(c) A procurement workgroup.
(d) A local outreach workgroup.

14977.5.
 (a) Notwithstanding any other provision of law, the Department of General Services, pursuant to this chapter, may enter into exclusive or nonexclusive contracts on a bid or negotiated basis with manufacturers and suppliers of single source or multisource pharmaceuticals. The department may obtain from those manufacturers and suppliers discounts, rebates, or refunds based on quantities purchased insofar as permissible under federal law. Contracts entered into pursuant to this chapter may include price discounts, rebates, refunds, or other strategies aimed at managing escalating prescription pharmaceutical drug prices.
(b) Contracts under this chapter shall be exempt from Chapter 2 (commencing with Section 10290) of Part 2 of Division 2 of the Public Contract Code.

14977.6.
 The Department of General Services may appoint and contract with a pharmaceutical benefits manager or other entity for purposes of facilitating the acquisition of pharmaceuticals purchased pursuant to this chapter. The pharmaceutical benefits manager or other entity may do all of the following:
(a) Negotiate price discounts, rebates, or other options that achieve the greatest savings on pharmaceuticals with pharmaceutical manufacturers and wholesalers.
(b) Purchase pharmaceuticals for participating state, district, county, or municipal governmental entities.
(c) Act as a consultant to the department and the collaborative.

14977.7.
 (a) The following state agencies shall participate in the prescription drug bulk purchasing program authorized under this chapter.
(1) The State Department of State Hospitals.
(2) The Department of Corrections and Rehabilitation.
(3) The State Department of Developmental Services.
(b) Any state, district, county, city, municipal, or public agency governmental entity, other than a state entity specified in subdivision (a), may elect to participate in the coordinated purchasing program.

14977.7.14977.8.
 (a) On or before July 1, 2018, the Department of General Services shall submit a report to the appropriate policy and fiscal committees of the Legislature on the activities of the collaborative. The report shall be filed annually until 2022. The report shall include, but not be limited to, all of the following:
(1) The number and a description of the contracts entered into with pharmaceutical benefits managers or other pharmaceutical drug purchasing agents.
(2) The number and a description of entities that elect to participate in pharmaceutical purchasing coordinated by the collaborative.
(3) The per month cost of pharmaceuticals for each member agency.
(4) Other options and strategies that have been or will be undertaken by the collaborative pursuant to this chapter.
(5) The progress made with regard to the investigation and implementation of options and strategies to achieve the greatest savings on pharmaceuticals pursuant to paragraph (3) of subdivision (a) of Section 14977.3
(6) The estimated cost savings attributable to activities that have been or will be undertaken by the collaborative.
(b) (1) A report to be submitted pursuant to subdivision (a) shall be submitted in compliance with Section 9795 of the Government Code.
(2) Pursuant to Section 10231.5 of the Government Code, this section is repealed on February 1, 2023.