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SB-852 Health care: prescription drugs.(2019-2020)

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Date Published: 03/16/2020 02:00 PM
SB852:v98#DOCUMENT

Amended  IN  Senate  March 16, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 852


Introduced by Senator Pan

January 13, 2020


An act to add Chapter 10 (commencing with Section 127690) to Part 2 of Division 107 of the Health and Safety Code, relating to health care.


LEGISLATIVE COUNSEL'S DIGEST


SB 852, as amended, Pan. Health care: prescription drugs.
Existing law 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. Existing law authorizes the department to obtain from those manufacturers and suppliers discounts, rebates, or refunds based on quantities purchased, as permissible under federal law. Existing law authorizes those contracts to include price discounts, rebates, refunds, or other strategies aimed at managing escalating prescription drug prices. Existing law requires certain state agencies to participate in that prescription drug bulk purchasing program, including the State Department of State Hospitals and the State Department of Developmental Services. Existing law establishes the California Health and Human Services Agency, which includes departments charged with the administration of health, social, and other human services.
This bill would establish the Office of Drug Contracting and Manufacturing within the California Health and Human Services Agency to, among other things, increase patient access to affordable drugs. The bill would require the office, on or before January 1, 2022, to contract or partner with at least one drug company or generic drug manufacturer to produce at least 10 generic prescription drugs, as determined by the office, and insulin at a price that results in savings for providers, patients, and purchasers. The bill would require the office prepare and submit a report to the Legislature on or before January 1, 2022, that, among other things, assesses the feasibility of the office to directly manufacture generic prescription drugs and includes an estimate of the cost of building or acquiring manufacturing capacity. The bill would also require the office to prepare and submit a report to the Legislature on or before January 1, 2023, that assesses the major problems faced by patients in accessing affordable generic prescription drugs, describes the status of the drugs targeted for manufacture under the office’s contracts or partnerships, and analyzes how the office’s activities have impacted competition, access, and costs for those drugs.

Existing law requires a manufacturer of a prescription drug with a wholesale acquisition cost of more than $40 for a course of therapy that is purchased or reimbursed by specified purchasers, including state agencies, health care service plans, health insurers, and pharmacy benefit managers, to notify the purchaser of an increase in the wholesale acquisition cost of a prescription drug if that increase exceeds 16 percent, as specified.

This bill would state the intent of the Legislature to introduce legislation to require the State of California to manufacture generic prescription drugs for the purposes of controlling prescription drug costs. The bill would also make related findings and declarations.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

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


SECTION 1.

 Chapter 10 (commencing with Section 127690) is added to Part 2 of Division 107 of the Health and Safety Code, to read:
CHAPTER  10. California Affordable Drug Manufacturing Act of 2020

127690.
 This chapter may be cited as the California Affordable Drug Manufacturing Act of 2020.

127691.
 (a) The Office of Drug Contracting and Manufacturing is hereby established within the California Health and Human Services Agency to increase competition, lower prices, and address shortages in the market for generic prescription drugs, to reduce the cost of prescription drugs for public and private purchasers, taxpayers, and consumers, and to increase patient access to affordable drugs.
(b) The office shall be headed by a director, who shall be appointed by the Governor, subject to confirmation by the Senate.

127692.
 (a) On or before January 1, 2022, the office shall contract or partner with at least one drug company or generic drug manufacturer that is licensed by the United States Food and Drug Administration to produce or distribute generic prescription drugs, with the intent that these drugs be made widely available to public and private purchasers, providers and suppliers as defined in subdivision (b) of Section 1367.50, and pharmacies as defined in Section 4037 of the Business and Professions Code.
(b) (1) The office shall only contract or partner with a drug company or a generic drug manufacturer pursuant to subdivision (a) to produce a generic prescription drug at a price that results in savings for providers, patients, and purchasers. The price shall not be greater than an amount that considers all of the following:
(A) United States Food and Drug Administration user fees.
(B) Abbreviated new drug application acquisition costs.
(C) Mandatory rebates.
(D) Total contracting and production costs for the drug.
(E) Research and development costs attributed to the drug over a five-year period.
(2) Each drug shall be made available to providers, patients, and purchasers at a transparent price and without rebates.
(3) The office shall prioritize the manufacturing of generic prescription drugs that have the greatest impact on lowering drug costs to patients, increasing competition and addressing shortages in the prescription drug market, improving public health, or reducing the cost of prescription drugs to public and private purchasers.
(c) (1) The contracts or partnerships entered into pursuant to subdivision (a) shall provide for the production of at least 10 generic prescription drugs. To determine the generic prescription drugs to be produced, the office shall consider the report produced by the Department of Managed Health Care pursuant to subdivision (b) of Section 1367.243, the report produced by the Department of Insurance pursuant to subdivision (b) of Section 10123.205 of the Insurance Code, and pharmacy spending data from Medi-Cal and other entities for which the state pays the cost of generic prescription drugs.
(2) The contracts or partnerships entered into pursuant to subdivision (a) shall also provide for the production of insulin.
(3) The office may contract or partner with a drug company or generic drug manufacturer for the production of additional generic prescription drugs that meet the pricing requirements of subdivision (b).
(d) The office shall consult with all of the following public and private purchasers to develop a list of generic prescription drugs to be manufactured by a drug company or generic drug manufacturer and to determine the volume of each generic prescription drug that can be manufactured over a multiyear period to support a market for a lower cost generic prescription drug:
(1) The Public Employees’ Retirement System, the State Department of Health Care Services, the Department of General Services, and the Department of Corrections and Rehabilitation, or the entities acting on behalf of each of those state purchasers.
(2) Licensed health care service plans.
(3) Health insurers holding a valid outstanding certificate of authority from the Insurance Commissioner.
(4) Hospitals.

127693.
 (a) On or before January 1, 2022, the office shall prepare and submit a report to the Legislature that assesses the feasibility of the office to do all of the following:
(1) Prepare and submit applications for approval to the United States Food and Drug Administration for the manufacture of at least 10 generic prescription drugs, selected pursuant to subdivision (d) of Section 127692, plus insulin.
(2) Acquire the rights to manufacture generic prescription drugs.
(3) Directly manufacture generic prescription drugs.
(4) Determine a fair price for each generic prescription drug, which includes consideration of all of the following:
(A) The impact of price on patient access to the generic prescription drug.
(B) The cost of the generic prescription drug to public health care programs.
(C) The cost of the generic prescription drug to public purchasers.
(D) The cost to the state to manufacture the generic prescription drug.
(E) The total cost to the state to manufacture generic prescription drugs.
(F) The impact of the price on market competition for the generic prescription drug.
(G) The office’s administrative and operating costs.
(5) Sell manufactured generic prescription drugs at a fair price.
(b) The report shall include all of the following:
(1) An analysis of the fiscal costs and offsetting savings of directly manufacturing generic prescription drugs.
(2) The estimated cost of building or acquiring manufacturing capacity.
(3) The estimated business expense of overseeing generic prescription drug approval and manufacturing activities.
(4) The estimated resulting savings that could be generated for the state as a purchaser over a five-year period.
(5) An analysis of legal requirements or barriers.
(6) An analysis of potential liability issues that could impact the state.
(c) To assess the fiscal costs, the office may consider potential revenues received from selling a generic prescription drug produced pursuant to this chapter at a fair price to other entities and states, consistent with federal law. Any revenues received from the sale of those drugs shall be used for the activities of the office upon appropriation by the Legislature.
(d) The report shall be submitted in compliance with Section 9795 of the Government Code.
(e) This section shall remain in effect only until January 1, 2026, and as of that date is repealed.

127694.
 For each generic prescription drug that the office determines shall be directly manufactured pursuant to this chapter, the office shall do both of the following:
(a) Submit an application under Section 505(j) or 515 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. Secs. 355 and 360) or Section 351(k) of the federal Public Health Service Act (42 U.S.C. Sec. 262), or submit a notification under Section 510(k) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 360).
(b) Acquire the rights to manufacture the drug from the holder of an application approved under Section 505(c) or (j) or Section 515 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. Secs. 355 and 360e) or Section 351 of the federal Public Health Service Act (42 U.S.C. Sec. 262), or cleared under Section 510(k) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 360).

127695.
 (a) On or before January 1, 2023, the office shall prepare and submit a report to the Legislature that includes at least all of the following:
(1) An assessment of the major problems faced by patients in accessing affordable generic prescription drugs.
(2) A description of the status of all drugs targeted under this chapter.
(3) An analysis of how the activities of the office have impacted competition, access to targeted drugs, the costs of those drugs, and the costs of generic prescription drugs to public and private purchasers.
(b) The report shall be submitted in compliance with Section 9795 of the Government Code.
(c) This section shall remain in effect only until January 1, 2027, and as of that date is repealed.

SECTION 1.

The Legislature finds and declares both of the following:

(a)The State of California has a substantial interest in the cost of prescription drugs. California is a major purchaser of prescription drugs through the Public Employees’ Retirement System, the State Department of Health Care Services, the Department of General Services, the Department of Corrections and Rehabilitation, and entities acting on behalf of state purchasers.

(b)According to an Office of Statewide Health Planning and Development report on prescription drug price increases, generic drugs had the largest median price increase from 2017 through the beginning of 2019, rising 37.6 percent, compared to a 25.8-percent median price increase for all drugs over the same three-year period.

SEC. 2.

It is the intent of the Legislature to introduce legislation to require the State of California to manufacture generic prescription drugs for the purposes of controlling prescription drug costs.