California Legal Codes and Statutes

Chapter 2 - Prescription Drug Discounts

California Health and Safety Code — §§ 130505-130513

Sections (9)

§ 130505

Added by Stats. 2006, Ch. 619, Sec. 2. Effective January 1, 2007. Provisions operative and implemented on or after July 1, 2010, as prescribed in Section 130500. Conditionally inoperative on February 1, 2015. Repealed conditionally on January 1, 2016, pursuant to Section 130500.

(a)The amount a participating, eligible Californian pays for a drug through the program shall be equal to the lower of the participating pharmacy’s usual and customary charge or the pharmacy contract rate pursuant to subdivision (c), less a program discount for the specific drug or an average discount for a group of drugs or all drugs covered by the program.
(b)In determining program discounts on individual drugs, the department shall take into account the rebates provided by the drug’s manufacturer.
(c)The department may contract with participating pharmacies for a rate other than the pharmacies’ usual and customary rate for prescription drugs, including multiple-source drugs.
(d)This division shall apply only to prescription drugs dispensed to eligible Californians on an outpatient basis.
§ 130506

Amended by Stats. 2021, Ch. 615, Sec. 295. (AB 474) Effective January 1, 2022. Operative January 1, 2023, pursuant to Sec. 463 of Stats. 2021, Ch. 615.

(a)The department shall negotiate drug discount agreements with manufacturers to provide discounts for single-source and multiple-source prescription drugs through the program. The department shall attempt to negotiate the maximum possible discount for an eligible Californian. The department shall attempt to negotiate, with each manufacturer, discounts to offer single-source prescription drugs under the program at a volume weighted average discount that is equal to or below any one of the following benchmark prices:
(1)Eighty-five percent of the average manufacturer price for a drug, as published by the federal Centers for Medicare and Medicaid Services.
(2)The lowest price provided to any nonpublic entity in the state by a manufacturer to the extent that the Medicaid best price exists under federal law.
(3)The Medicaid best price, to the extent that this price exists under federal law.
(b)The department may require the drug manufacturer to provide information that is reasonably necessary for the department to carry out its duties pursuant to this division.
(c)The department shall pursue manufacturer discount agreements to ensure that the number and type of drugs available through the program is sufficient to give an eligible Californian a formulary comparable to the Medi-Cal list of contract drugs, or if this

information is available to the department, a formulary that is comparable to that provided to CalPERS enrollees.

(d)To obtain the most favorable discounts, the department may limit the number of drugs available through the program.
(e)The drug discount agreements negotiated pursuant to this section shall be used to reduce the cost of drugs purchased by program participants and to fund program costs pursuant to Section 130542.1.
(f)All information reported by a manufacturer to, negotiations with, and agreements executed with, the department or its third-party vendor pursuant to this section, shall be considered confidential and corporate proprietary information. This information shall not be subject to

disclosure under the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code). The California State Auditor’s Office and the Controller shall have access to pricing information in a manner that is consistent with their access to this information under the Medi-Cal program and under law. The California State Auditor’s Office and the Controller may use this information only to investigate or audit the administration of the program. Neither the California State Auditor’s Office, the Controller, nor the department may disclose this information in a form that identifies a specific manufacturer or wholesaler or prices charged for drugs of this manufacturer or wholesaler. Information provided to the department pursuant to subdivision (e) of Section 130530 shall not be affected by the confidentiality protections established by this subdivision.

(g)(1) Any pharmacy licensed pursuant to Chapter 9 (commencing with Section 4000) of Division 2 of the Business and Professions Code may participate in the program.
(2)Any manufacturer may participate in the program.
§ 130507

Amended by Stats. 2010, Ch. 717, Sec. 23. (SB 853) Effective October 19, 2010. Provisions operative and implemented on or after July 1, 2010, as prescribed in Section 130500. Conditionally inoperative on February 1, 2015. Repealed conditionally on January 1, 2016, pursuant to Section 130500.

(a)On August 1, 2017, the department shall determine whether manufacturer participation in the program has been sufficient to meet both of the following benchmarks:
(1)The number and type of drugs available through the program are sufficient to give eligible Californians a formulary comparable to the Medi-Cal list of contract drugs or, if this information is available to the department, a formulary comparable to that provided to CalPERS enrollees.
(2)The volume weighted average discount of single-source prescription drugs offered pursuant to this program is equal to or below any one of the benchmark prices described

in subdivision (a) of Section 130506.

(b)On and after August 1, 2017, the department shall reassess program outcomes, at least once every year, consistent with the benchmarks described in subdivision (a).
§ 130508

Added by Stats. 2006, Ch. 619, Sec. 2. Effective January 1, 2007. Provisions operative and implemented on or after July 1, 2010, as prescribed in Section 130500. Conditionally inoperative on February 1, 2015. Repealed conditionally on January 1, 2016, pursuant to Section 130500.

To the maximum extent possible, the department shall assure that enrollment and other administrative actions are seamless to all eligible Californians.

§ 130509

Amended by Stats. 2010, Ch. 717, Sec. 24. (SB 853) Effective October 19, 2010. Provisions operative and implemented on or after July 1, 2010, as prescribed in Section 130500. Conditionally inoperative on February 1, 2015. Repealed conditionally on January 1, 2016, pursuant to Section 130500.

(a)The department may require prior authorization in the Medi-Cal program for any drug of a manufacturer if the manufacturer fails to agree to a volume weighted average discount for single-source prescription drugs that is equal to or below any one of the benchmark prices described in subdivision (a) of Section 130506 and only to the extent that this requirement does not increase costs to the Medi-Cal program, as determined pursuant to subdivision (c).
(b)If prior authorization is required for a drug pursuant to this section, a Medi-Cal beneficiary shall not be denied the continued use of a drug that is part of a prescribed therapy until that drug is no longer prescribed for that

beneficiary’s therapy. The department shall approve or deny requests for prior authorization necessitated by this section as required by state or federal law.

(c)The department, in consultation with the Department of Finance, shall determine the fiscal impact of placing a drug on prior authorization pursuant to this section. In making this determination, the department shall consider all of the following:
(1)The net cost of the drug, including any rebates that would be lost if the drug is placed on prior authorization.
(2)The projected volume of purchases of the drug, before and after the drug is placed on prior authorization, considering the continuity of care provisions set forth in subdivision (b).
(3)The net cost of comparable drugs to which

volume would be shifted if a drug is placed on prior authorization, including any additional rebates that would be received.

(4)The projected volume of purchases of comparable drugs, before and after the drug is placed on prior authorization.
(5)Any other factors determined by the department to be relevant to a determination of the fiscal impact of placing a drug on prior authorization.
(d)This section shall be implemented only to the extent permitted under federal law, and in a manner consistent with state and federal laws.
(e)This section may apply to any manufacturer that has not negotiated with the department.
(f)The department shall notify the Speaker of the Assembly and the

President pro Tempore of the Senate that the department is requiring prior authorization no later than five days after making this requirement.

(g)(1) Subject to paragraph (2), this section shall be implemented on and after August 1, 2017.
(2)This section shall be implemented only if the department determines that participation by manufacturers has been insufficient to meet both of the benchmarks identified in Section 130507.
§ 130510

Added by Stats. 2006, Ch. 619, Sec. 2. Effective January 1, 2007. Provisions operative and implemented on or after July 1, 2010, as prescribed in Section 130500. Conditionally inoperative on February 1, 2015. Repealed conditionally on January 1, 2016, pursuant to Section 130500.

The names of manufacturers of single-source drugs that do or do not enter into discount agreements with the department pursuant to this division shall be public information and shall be posted on the department’s Internet Web site when the discount agreements are reached or the manufacturer ends negotiations, commencing within six months after the initial implementation date of this division and updated on the first of each month thereafter.

§ 130511

Added by Stats. 2006, Ch. 619, Sec. 2. Effective January 1, 2007. Provisions operative and implemented on or after July 1, 2010, as prescribed in Section 130500. Conditionally inoperative on February 1, 2015. Repealed conditionally on January 1, 2016, pursuant to Section 130500.

(a)Each drug discount agreement shall do all of the following:
(1)Specify which of the manufacturer’s drugs are included in the agreement.
(2)Permit the department to remove a drug from the agreement if there is a dispute over the drug’s utilization.
(3)Permit a manufacturer to audit claims for the drugs the manufacturer provides under the program. Claims information provided to manufacturers shall comply with all federal and state privacy laws that protect a program participant’s health information.
(b)In addition to the requirements of subdivision (a), each drug discount agreement with a single-source manufacturer shall do all of the following:
(1)Require the manufacturer to make a rebate payment to the department for each drug described in paragraph (1) of subdivision (a) dispensed to a program participant.
(2)Require the manufacturer to make the rebate payments to the department on at least a quarterly basis.
(3)Require the manufacturer to provide, upon request, documentation to validate the rebate.
(c)The department may collect prospective rebates from single-source manufacturers for payment to pharmacies. The amount of the prospective discount shall be specified in the drug rebate agreements.
(d)(1) Manufacturers shall calculate and pay interest on late or unpaid rebates. The interest shall not apply to any prior period adjustments of unit rebate amounts or department utilization adjustments.
(2)For rebate payments to the program, manufacturers shall calculate and pay interest on late or unpaid rebates for quarters that begin on or after January 1, 2007.
(e)Interest required by subdivision (d) shall begin accruing 38 calendar days from the date of mailing of the invoice, including supporting utilization data sent to the manufacturer. Interest shall continue to accrue until the date of mailing of the manufacturer’s payment. Interest rates and calculations for purposes of this section shall be at 10 percent.
(f)A participating manufacturer shall clearly identify all rebates, interest, and other payments, and payment transmittal forms for the program, in a manner designated by the department.
§ 130512

Added by Stats. 2006, Ch. 619, Sec. 2. Effective January 1, 2007. Provisions operative and implemented on or after July 1, 2010, as prescribed in Section 130500. Conditionally inoperative on February 1, 2015. Repealed conditionally on January 1, 2016, pursuant to Section 130500.

(a)The department shall generate a monthly report that, at a minimum, provides all of the following:
(1)Drug utilization information.
(2)Amounts paid to pharmacies.
(3)Program discounts compared to the usual customary price.
(4)Aggregate amounts of rebates collected from manufacturers.
(5)A summary of the problems or complaints reported regarding the program.
(b)Information provided in paragraphs (1), (2), and (3) of subdivision (a) shall be at the national drug code level.
(c)The department shall generate an annual report that, in addition to the information described in subdivision (a), reports on the number of all of the following:
(1)Individuals enrolled.
(2)Individuals receiving a prescription under the program.
(3)Participating pharmacies.
(4)Participating manufacturers.
(d)All reports shall be made available on the department’s Internet Web site.
§ 130513

Added by Stats. 2006, Ch. 619, Sec. 2. Effective January 1, 2007. Provisions operative and implemented on or after July 1, 2010, as prescribed in Section 130500. Conditionally inoperative on February 1, 2015. Repealed conditionally on January 1, 2016, pursuant to Section 130500.

(a)The department shall establish and maintain a claims processing system that complies with all of the following requirements:
(1)Charges a price that meets the requirements of this division.
(2)Provides the pharmacy with the dollar amount of the discount to be returned to the pharmacy.
(3)Provides drug utilization review warnings to pharmacies consistent with the drug utilization review standards provided in federal law.
(b)The department shall pay a participating pharmacy the discount provided to program participants pursuant to this division by a date that is not later than two weeks after the claim is received.
(c)The department shall develop a mechanism for the program participants to report problems or complaints.