Chapter 9 - Prescription Drug Pricing for Purchasers

California Health and Safety Code — §§ 127675-127685

Sections (7)

Amended by Stats. 2021, Ch. 143, Sec. 109. (AB 133) Effective July 27, 2021.

(a)This chapter shall apply to a manufacturer of a prescription drug that is purchased or reimbursed by any of the following:

(1)A state purchaser in California, including, but not limited to, 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 an entity acting on behalf of a state purchaser.

(2)A licensed health care service plan.

(3)A health insurer holding a valid outstanding certificate of authority from the Insurance

Commissioner.

(4)A pharmacy benefit manager as defined in subdivision (j) of Section 4430 of the Business and Professions Code.

(b)For the purposes of this chapter, the term “department” shall mean the Department of Health Care Access and Information.

§ 127676

Added by Stats. 2017, Ch. 603, Sec. 4. (SB 17) Effective January 1, 2018.

(a)The Legislature finds and declares that the State of California has a substantial public interest in the price and cost of prescription drugs. California is a major purchaser 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 other entities acting on behalf of a state purchaser. California also provides major tax expenditures through the tax exclusion of employer sponsored coverage and tax deductibility of coverage purchased by individuals, as well as tax deductibility of excess health care costs for individuals and families.

(b)(1) It is the intent of the Legislature in enacting this chapter to provide notice and disclosure of information relating to the cost and pricing of prescription drugs in order to provide accountability to the state for prescription drug pricing.

(2)It is further the intent of the Legislature to permit a manufacturer of a prescription drug to voluntarily make pricing decisions regarding a prescription drug, including any price increases. It is further the intent of the Legislature to permit purchasers, both public and private, as well as pharmacy benefit managers, to negotiate discounts and rebates consistent with existing state and federal law.

§ 127677

Amended by Stats. 2021, Ch. 143, Sec. 110. (AB 133) Effective July 27, 2021.

(a)A manufacturer of a prescription drug with a wholesale acquisition cost of more than forty dollars ($40) for a course of therapy shall notify each purchaser described in Section 127675 if the increase in the wholesale acquisition cost of a prescription drug is more than 16 percent, including the proposed increase and the cumulative increases that occurred within the previous two calendar years prior to the current year. For purposes of this section, a “course of therapy” is defined as either of the following:

(1)The recommended daily dosage units of a prescription drug pursuant to its prescribing label as approved by the federal Food and Drug Administration for 30 days.

(2)The recommended daily dosage units of a prescription drug pursuant to its prescribing label as approved by the federal Food and Drug Administration for a normal course of treatment that is less than 30 days.

(b)The notice required by subdivision (a) shall be provided in writing at least 60 days prior to the planned effective date of the increase.

(c)(1) The notice required by subdivision (a) shall include the date of the increase, the current wholesale acquisition cost of the prescription drug, and the dollar amount of the future increase in the wholesale acquisition cost of the prescription drug.

(2)The notice required by subdivision

(a)shall include a statement regarding whether a change or improvement in the drug necessitates the price increase. If so, the manufacturer shall describe the change or improvement.

(d)The notice required by subdivision (a) shall be provided to each state purchaser and other purchasers described in paragraphs (2) to (4), inclusive, of subdivision (a) of Section 127675 if a purchaser registers with the department for the purpose of this notification. The department shall make available to manufacturers a list of registered purchasers for the purpose of this notification.

(e)If a pharmacy benefit manager receives a notice of an increase in wholesale acquisition cost consistent with subdivision (a), it shall notify its large contracting public and private purchasers of the

increase. For the purposes of this section, a “large purchaser” means a purchaser that provides coverage to more than 500 covered lives.

§ 127679

Amended by Stats. 2021, Ch. 143, Sec. 111. (AB 133) Effective July 27, 2021.

(a)On a quarterly basis at a time prescribed by the department and in a format prescribed by the department, commencing no earlier than January 1, 2019, a manufacturer shall report to the department all of the following information for each drug for which an increase in wholesale acquisition cost is described in Section 127677:

(1)A description of the specific financial and nonfinancial factors used to make the decision to increase the wholesale acquisition cost of the drug and the amount of the increase, including, but not limited to, an explanation of how these factors explain the increase in the wholesale acquisition cost of the drug.

(2)A schedule of wholesale acquisition cost increases for the drug for the previous five years if the drug was manufactured by the company.

(3)If the drug was acquired by the manufacturer within the previous five years, all of the following information:

(A)The wholesale acquisition cost of the drug at the time of acquisition and in the calendar year prior to acquisition.

(B)The name of the company from which the drug was acquired, the date acquired, and the purchase price.

(C)The year the drug was introduced to market and the wholesale acquisition cost of the drug at the time of introduction.

(4)The

patent expiration date of the drug if it is under patent.

(5)If the drug is a multiple source drug, an innovator multiple source drug, a noninnovator multiple source drug, or a single source drug, as defined in subparagraph (A) of paragraph (7) of subdivision (k) of Section 1396r–8 of Title 42 of the United States Code.

(6)A description of the change or improvement in the drug, if any, that necessitates the price increase.

(7)Volume of sales of the manufacturer’s drug in the United States for the previous year.

(b)The manufacturer may limit the information reported pursuant to subdivision (a) to that which is otherwise in the public domain or publicly

available.

(c)The department shall publish the information provided to it pursuant to this section on its internet website on no less than a quarterly basis. The information shall be published within 60 days of receipt from a manufacturer. The information shall be published in a manner that identifies the information that is disclosed on a per-drug basis and shall not be aggregated in a manner that would not allow identification of the drug.

(d)The department shall be responsible for the enforcement of this section.

(e)A manufacturer of a prescription drug subject to this chapter that does not report the information required pursuant to this section is liable for a civil penalty of one thousand dollars ($1,000) per day

for every day after the reporting period described in this section that the required information is not reported.

(f)A civil penalty shall be assessed and recovered in a civil action brought by the office in the name of the people of the State of California. Assessment of a civil penalty may, at the request of any manufacturer of a prescription drug subject to this section, be reviewed on appeal, and the penalty may be reduced or waived for good cause.

(g)Any money received by the department pursuant to this section shall be paid into the Managed Care Fund.

§ 127681

Amended by Stats. 2021, Ch. 143, Sec. 112. (AB 133) Effective July 27, 2021.

(a)A manufacturer of a prescription drug shall notify the department in writing if it is introducing a new prescription drug to market at a wholesale acquisition cost that exceeds the threshold set for a specialty drug under the Medicare Part D program (Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173)). The notice shall be provided in writing within three days after the release of the drug in the commercial market. A manufacturer may make this notification pending approval by the federal Food and Drug Administration, if commercial availability is expected within three days of approval.

(b)No later than 30 days after notification

pursuant to this section, a manufacturer shall report all of the following information to the department in a format prescribed by the department:

(1)A description of the marketing and pricing plans used in the launch of the new drug in the United States and internationally.

(2)The estimated volume of patients that may be prescribed the drug.

(3)If the drug was granted breakthrough therapy designation or priority review by the federal Food and Drug Administration prior to final approval.

(4)The date and price of acquisition if the drug was not developed by the manufacturer.

(c)The

manufacturer may limit the information reported pursuant to subdivision (b) to that which is otherwise in the public domain or publicly available.

(d)The department shall publish the information provided to it pursuant to this section on its internet website on no less than a quarterly basis. The information shall be published in a manner that identifies the information that is disclosed on a per-drug basis and shall not be aggregated in a manner that would not allow identification of the drug.

(e)The department shall be responsible for the enforcement of this section.

(f)A manufacturer of a prescription drug subject to this chapter that does not report the information required pursuant to this section is liable for a

civil penalty of one thousand dollars ($1,000) per day for every day after the notification period described in this section that the required information is not reported.

(g)A civil penalty shall be assessed and recovered in a civil action brought by the department in the name of the people of the State of California. Assessment of a civil penalty may, at the request of any manufacturer of a prescription drug subject to this section, be reviewed on appeal, and the penalty may be reduced or waived for good cause.

(h)Any money received by the department pursuant to this section shall be paid into the Managed Care Fund.

§ 127683

Amended by Stats. 2021, Ch. 143, Sec. 113. (AB 133) Effective July 27, 2021.

(a)Funding for the actual and necessary expenses of the department to conduct the activities described in this section and in Sections 127676, 127679, 127681, and 127685, shall be provided, subject to appropriation by the Legislature, from transfers of moneys from the Managed Care Fund and the Insurance Fund.

(b)The share of funding from the Managed Care Fund shall be based on the number of covered lives in the state that are covered under plans regulated by the Department of Managed Health Care, including covered lives under Medi-Cal managed care, as determined by the Department of Managed Health Care, in proportion to the total number of all covered lives in the state.

(c)The share of funding to be provided from the Insurance Fund shall be based on the number of covered lives in the state that are covered under health insurance policies and benefit plans regulated by the Department of Insurance, including covered lives under Medicare supplement plans, as determined by the Department of Insurance, in proportion to the total number of all covered lives in the state.

§ 127685

Amended by Stats. 2021, Ch. 143, Sec. 114. (AB 133) Effective July 27, 2021.

(a)The department may adopt regulations or issue guidance for the implementation of this chapter. All information that is required to be reported to the department pursuant to this chapter shall be reported in a form prescribed by the department, commencing in the first calendar quarter of 2019.

(b)The department may consult with the Department of Managed Health Care, the Department of Insurance, the California State Board of Pharmacy, and any state purchaser of prescription drugs, or an entity acting on behalf of a state purchaser, in issuing guidance or adopting necessary regulations pursuant to subdivision (a), in posting information on its internet website pursuant to this chapter,

and in taking any other action for the purpose of implementing this chapter.