BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2132|
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THIRD READING
Bill No: AB 2132
Author: Matthews (D)
Amended: 8/26/02 in Senate
Vote: 21
SENATE HEALTH & HUMAN SERV. COMMITTEE : 8-0, 6/19/02
AYES: Ortiz, Haynes, Battin, Escutia, Kuehl, Polanco,
Romero, Vasconcellos
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 78-0, 5/29/02 - See last page for vote
SUBJECT : Medi-Cal: medical supplies: contracts
SOURCE : Author
DIGEST : This bill requires the State Department of
Health Services to enter into demonstration contracts with
manufacturers of medical supplies for five categories of
medical supplies purchased by the Medi-Cal program.
Senate floor amendments of 8/26/02 address a series of
technical concerns raised by the State Department of Health
Services (DHS) and seek to facilitate implementation of the
bill. The amendments require DHS to enter into
demonstration contracts with manufacturers of medical
supplies for four items instead of five categories of
medical supplies. They authorize DHS to utilize cost
saving mechanisms, in addition to rebates, when
establishing these demonstration projects. They extend the
CONTINUED
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date by which DHS must report project outcomes to the
Legislature from 2005 to 2007. Lastly, the amendments
establish the Legislature's intent that implementation of
the bill be cost neutral and not result in increased costs
to the department.
ANALYSIS : Existing law:
1.Establishes the Medi-Cal program, administered by State
Department of Health Services (DHS), which provides
comprehensive health benefits to low-income children,
their parents or caretaker relatives, pregnant women,
elderly, blind or disabled persons, nursing home
residents and refugees who meet specified eligibility
criteria.
2.Permits DHS to enter into contracts with manufacturers of
drugs, for the purpose of obtaining the most favorable
price for such drugs based upon the large quantity
purchased under the Medi-Cal program, and to enable DHS
to obtain from manufacturers discounts, rebates, or
refunds based on such quantities purchased, and to
maintain a list of those drugs for which contracts have
been executed.
3.Permits DHS to enter into exclusive or nonexclusive
contracts on a bid or negotiated basis with
manufacturers, distributors, dispensers, or suppliers of
appliances, durable medical equipment, medical supplies,
and other product-type health care for the purpose of
obtaining the most favorable prices to the state and to
assure adequate quality of the product.
This bill:
1.Requires DHS to enter into demonstration contracts with
manufacturers of medical supplies for four items of
medical supplies existing on the Medi-Cal pharmacy claims
processing system, to establish rebates, or other
cost-saving mechanisms and demonstrate cost savings in
the purchase of medical supplies.
2.Requires DHS to maintain a list of supplies for which
contracts have been executed.
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3.Requires DHS to preserve reasonable access by
beneficiaries to supplies involved in the demonstration
contracts.
4.Requires DHS to report the outcomes of these
demonstration contracts to the Legislature no later than
January 1, 2007.
5.Provides that this bill shall not prevent a small retail
business from continuing to supply medical supplies for
use by Medi-Cal beneficiaries.
6. States Legislative intent that the implementation of
this act by the State Department of Health Services
shall be cost-neutral and shall not result in increased
costs to the department.
Comments
The author argues that a search for cost savings in the
Medi-Cal program is desperately needed at a time when
California is facing a significant budget shortfall. Both
the Legislative Analyst's Office (LAO) and DHS indicate
that cost savings can be realized if the state makes
changes in the way it contracts for medical supplies. This
bill adopts recommendations of the LAO to reduce costs in
Medi-Cal contracting through the use of rebates, bulk
purchasing, competitive bidding or other contract features.
In the 2002 Budget Bill analysis, the LAO proposed the use
of competitive bidding in the contracting of durable
medical equipment and medical supplies, projecting a saving
of $17 million. DHS has submitted a budget change proposal
outlining a plan to seek contract rebates of $17.9 million
with providers of Blood Glucose Test Strips, a medical
supply item that currently has an annual cost of $56
million. These rebates would save the General Fund $8.9
million. DHS proposes that administrative costs be
absorbed by existing staffing.
DHS proposes to contract for manufacturer rebates for blood
glucose strips and enteral nutrition products (nutrition
products in liquid form that are given directly into the
gastrointestinal tract). According to DHS, medical supply
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claims have risen to become about 13 pecent of the
drug/medical supply item, with expenditures of more than
$200 million annually. Other than incontinence supplies,
DHS does not contract with medical supply manufacturers.
DHS proposes to start with medical supplies that can
currently be identified using a UPN or bar code such as
blood glucose test strips. The Governor's budget also
proposes entering into contracts with manufacturers of
enteral nutrition products for discounts or rebates which
the budget assumes will produce a savings of $39.4 million
($19.7 million to the General Fund).
This bill seeks to expand the number of categories in which
DHS negotiates contracts to establish rebates and
demonstrate cost savings in the Medi-Cal program. It
requires the department to preserve reasonable access to
medical supplies by beneficiaries. It also provides that
this bill shall not prevent a small retail business from
continuing to supply medical supplies to Medi-Cal
beneficiaries.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/5/02) (unable to re-verify Support
and Opposition due to time limitation)
California Medical Association
OPPOSITION : (Verified 8/5/02)
Advanced Medical Technology Association
Roche Diagnostics
Johnson and Johnson
Diabetes Coalition of California
Department of Finance
ARGUMENTS IN SUPPORT : The California Medical Association
argues this measure will generate savings in the Medi-Cal
program without reducing beneficiary services.
ARGUMENTS IN OPPOSITION : The Advanced Medical Technology
Association and Roche Diagnostics argue this measure may
threaten patient access to the highest quality of care and
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significantly reduce consumer choice. Opponents argue this
bill may not result in long-term cost savings if it has the
effect of driving businesses out of the market and reducing
competition in the sale of medical supplies.
ASSEMBLY FLOOR
AYES: Aanestad, Alquist, Aroner, Ashburn, Bates, Bogh,
Briggs, Calderon, Bill Campbell, John Campbell,
Canciamilla, Cardenas, Cardoza, Chan, Chavez, Chu,
Cogdill, Cohn, Corbett, Correa, Cox, Daucher, Diaz,
Dickerson, Dutra, Firebaugh, Florez, Frommer, Goldberg,
Harman, Havice, Hertzberg, Hollingsworth, Horton,
Jackson, Keeley, Kehoe, Kelley, Koretz, La Suer, Leach,
Leonard, Leslie, Liu, Longville, Lowenthal, Maddox,
Maldonado, Matthews, Migden, Mountjoy, Nakano, Nation,
Negrete McLeod, Robert Pacheco, Rod Pacheco, Papan,
Pavley, Pescetti, Reyes, Richman, Runner, Salinas,
Shelley, Simitian, Steinberg, Strickland, Strom-Martin,
Thomson, Vargas, Washington, Wayne, Wiggins, Wright,
Wyland, Wyman, Zettel, Wesson
CP:sl 8/27/02 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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