Bill Text: CA SB838 | 2021-2022 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Health care: prescription drugs.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Passed) 2022-09-27 - Chaptered by Secretary of State. Chapter 603, Statutes of 2022. [SB838 Detail]

Download: California-2021-SB838-Amended.html

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Amended  IN  Senate  April 07, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill

No. 838

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Introduced by Senator Pan

January 06, 2022

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An act to amend Section 127693 of Sections 127691, 127692, 127693, 127694, 127695, and 127696 of, and to add Section 127694.1 to, the Health and Safety Code, relating to health care.

LEGISLATIVE COUNSEL'S DIGEST

SB 838, as amended, Pan. Health care: insulin manufacturing. prescription drugs.

Existing law, the California Affordable Drug Manufacturing Act of 2020, requires the California Health and Human Services Agency (CHHSA) to enter into partnerships, in consultation with other state departments as necessary to, among other things, increase patient access to affordable drugs. Existing law requires CHHSA to enter into such partnerships to produce or distribute at least one form of insulin, if a viable pathway for manufacturing a more affordable form of insulin exists at a price that results in savings. Existing law exempts all nonpublic information and documents obtained under this program from disclosure under the California Public Records Act in order to protect proprietary, confidential information regarding manufacturer or distribution costs and drug pricing, utilization, and rebates.

For purposes of implementing the California Affordable Drug Manufacturing Act of 2020, this bill would permit, until December 31, 2032, CHHSA and its departments to enter into exclusive or nonexclusive contracts on a bid or negotiated basis and would exempt these contracts from review or approval by the Department of General Services, as specified. The bill would eliminate the viability requirement for the manufacturing of insulin pursuant to these provisions and would require any partnership, among other things, to guarantee priority access to insulin supply for the state. The bill would additionally exempt all nonpublic information and documents prepared under the California Affordable Drug Manufacture Act of 2020 from disclosure under the California Public Records Act.

This bill would require, upon appropriation by the Legislature, the development of a California-based manufacturing facility for generic drugs with the intent of creating high-skill, high-paying jobs within the state.

Existing law, subject to appropriation by the Legislature, requires CHHSA to submit a report to the Legislature on or before July 1, 2023, that, among other things, assesses the feasibility and advantages of directly manufacturing generic prescription drugs and selling generic prescription drugs at a fair price. This provision is operative until January 1, 2025. Existing law also requires CHHSA to report to the Legislature on or before July 1, 2022, a description of the status of the drugs targeted for manufacture and an analysis of how CHHSA’s activities have impacted competition, access, and costs for those drugs. Under existing law, this provision is operative until January 1, 2026.

This bill would instead require CHHSA to submit the report assessing the feasibility of directly manufacturing generic prescription drugs on or before December 31, 2023. The bill would extend the deadline for the report describing the status of the drugs targeted for manufacture and the related impacts until December 31, 2022. The bill would extend the operative date of both these provisions until January 1, 2028.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

Existing law requires the California Health and Human Services Agency to enter into partnerships to increase patient access to affordable drugs, including partnerships to produce or distribute generic prescription drugs and at least one form of insulin, if a viable pathway for manufacturing a more affordable form of insulin exists at a price that results in savings.

This bill would eliminate that viability requirement.

Digest Key

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

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Bill Text

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

SECTION 1.

 Section 127691 of the Health and Safety Code is amended to read:

127691.

 For purposes of this chapter, the following definitions shall apply:

(a) “Generic drug” means a drug that is approved pursuant to subdivision (j) of Section 355 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. Sec. 301 et seq.), or a biosimilar, as defined under the federal Public Health Service Act (42 U.S.C. Sec. 262).

(b) “Partnerships” include, but are not limited to, agreements for the procurement of generic prescription drugs by way of contracts contracts, grant agreements, or purchasing by a payer, state governmental agency, group purchasing organization, nonprofit organization, or other entity.

SEC. 2.

 Section 127692 of the Health and Safety Code is amended to read:

127692.

 (a) The California Health and Human Services Agency (CHHSA) and its departments shall enter into partnerships, consistent with subdivision (b) of Section 127693, in consultation with other state departments as necessary, 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) Until December 31, 2032, for purposes of implementing this chapter, CHHSA and its departments, including the Department of Health Care Access and Information, may enter into exclusive or nonexclusive contracts on a bid or negotiated basis. Contracts entered into or amended pursuant to this section are exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and are exempt from the review or approval of any division of the Department of General Services.

(b)

(c) CHHSA shall have the ability to hire staff to oversee and project-manage the partnerships for manufacturing or distribution of generic prescription drugs, contingent upon an appropriation by the Legislature for this purpose.

(d) It is the Legislature’s intent that any contract entered into pursuant to subdivision (b) is a partnership intended to create a California-branded label for generic drugs. It is further the Legislature’s intent that any manufacturing that is done under this section is intended to benefit the residents of this state by ensuring adequate supplies and access to generic prescription drugs and lowering health care costs through savings to public health care programs and private health insurance coverage.

SECTION 1.SEC. 3.

 Section 127693 of the Health and Safety Code is amended to read:

127693.

 (a) CHHSA shall enter into partnerships resulting in the production or distribution of 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, as appropriate. The generic prescription drugs shall be produced or distributed by a drug company or generic drug manufacturer that is registered with the United States Food and Drug Administration.

(b) (1) CHHSA shall only enter into partnerships pursuant to subdivision (a) to produce a generic prescription drug at a price that results in savings, targets failures in the market for generic drugs, and improves patient access to affordable medications.

(2) For top drugs identified pursuant to the criteria listed in paragraph (5), CHHSA shall determine if viable pathways exist for partnerships to manufacture or distribute generic prescription drugs by examining the relevant legal, market, policy, and regulatory factors.

(3) CHHSA shall consider the following, if applicable, when setting the price of the generic prescription drug:

(A) United States Food and Drug Administration user fees.

(B) Abbreviated new drug application acquisition costs amortized over a five-year period.

(C) Mandatory rebates.

(D) Total contracting and production costs for the drug, including a reasonable amount for administrative, operating, and rate-of-return expenses of the drug company or generic drug manufacturer.

(E) Research and development costs attributed to the drug over a five-year period.

(F) Other initial start-up costs amortized over a five-year period.

(4) Each drug shall be made available to providers, patients, and purchasers at a transparent price and without rebates, other than federally required rebates.

(5) CHHSA shall prioritize the selection 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) In identifying generic prescription drugs to be produced, CHHSA 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 partnerships entered into pursuant to subdivision (a) shall include the production of at least one form of insulin. insulin made available at production and dispensing costs. The partnerships shall also:

(A) Guarantee priority access to insulin supply for the state.

(B) Guarantee manufacturing of at least four high-priority drugs for California, as identified pursuant to paragraph (5) of subdivision (b).

(C) Create a state brand identifying biosimilar insulin and generic productions sold in California under this section.

(3) CHHSA shall prioritize drugs for chronic and high-cost conditions, and shall consider prioritizing those that can be delivered through mail order.

(d) CHHSA shall consult with all of the following public and private purchasers to assist in developing a list of generic prescription drugs to be manufactured or distributed through partnerships and to determine the volume of each generic prescription drug that can be procured 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 California Health Benefit Exchange (Covered California), the State Department of Public Health, 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.

(5) Pharmacy benefit managers.

(e) Before effectuating a partnership pursuant to this section, CHHSA shall determine minimum thresholds for procurement of an entity’s expected volume of a targeted drug from the company or manufacturer over a multiyear period. In making advance commitments, CHHSA shall consult with the Statewide Pharmaceutical Program and the California Pharmaceutical Collaborative.

(f) The listed entities in paragraphs (2) to (5), inclusive, of subdivision (d) shall not be required to purchase prescription drugs from CHHSA or entities that contract or partner with CHHSA pursuant to this chapter.

(g) CHHSA shall not be required to consult with every entity listed in paragraphs (2) to (5), inclusive, of subdivision (d), so long as purchaser engagement includes a reasonable representation from these groups.

(h) Any partnership entered into pursuant to this section shall include representation and involvement with the governance of the contractor entity.

SEC. 4.

 Section 127694 of the Health and Safety Code is amended to read:

127694.

 (a) On or before July 1, December 31, 2023, CHHSA shall submit a report to the Legislature that assesses the feasibility of directly manufacturing generic prescription drugs and selling generic prescription drugs at a fair price. The report shall include an analysis of governance structure options for manufacturing functions, including chartering a private organization, a public-private partnership, or a public board of directors.

(b) This section shall only go into effect if the Legislature appropriates funds for this purpose in the annual budget.

(c) The report shall be submitted in compliance with Section 9795 of the Government Code.

(d) This section shall remain in effect only until January 1, 2025, 2028 and as of that date is repealed.

SEC. 5.

 Section 127694.1 is added to the Health and Safety Code, to read:

127694.1.

 Upon appropriation by the Legislature, CHHSA shall develop a California-based manufacturing facility for generic drugs, with the intent of creating high-skill, high-paying jobs with the state. The facility shall be at a location jointly determined between the state and the partner pursuant to Section 127692.

SEC. 6.

 Section 127695 of the Health and Safety Code is amended to read:

127695.

 (a) On or before July 1, December 31, 2022, CHHSA shall report to the Legislature on both of the following:

(1) A description of the status of all drugs targeted under this chapter.

(2) An analysis of how the activities of CHHSA may impact competition, access to targeted drugs, the costs of those drugs, and the costs of generic prescription drugs to public and private purchasers.

(b) This section shall remain in effect only until January 1, 2026, 2028, and as of that date is repealed.

SEC. 7.

 Section 127696 of the Health and Safety Code, as amended by Section 289 of Chapter 615 of the Statutes of 2021, is amended to read:

127696.

 In order to protect proprietary, confidential information regarding manufacturer or distribution costs and drug pricing, utilization, and rebates, it is necessary that this act limit the public’s right of access to that information. Notwithstanding any other provision of law, all nonpublic information and documents obtained or prepared under this section shall not be required to be disclosed pursuant to the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code), or any similar local law requiring the disclosure of public records.

SEC. 8.

 The Legislature finds and declares that Section 7 of this act, which amends Section 127696 of the Health and Safety Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:

In order to protect proprietary, confidential information regarding manufacturer or distribution costs and drug pricing, utilization, and rebates, it is necessary for that information to remain confidential.