(a) CHHSA shall enter into partnerships resulting in the production, procurement, 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 § 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, or 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, procure, 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 a 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, as appropriate, 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 § 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 made available at production and dispensing costs, if one does not already exist in the market. Dispensing costs may include related expenses such as transportation, distribution, and market operations. Any partnership shall also consider:

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

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

(C) Creating a state brand identifying biosimilar insulin and generic prescription drugs 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, as appropriate, to develop a list of generic prescription drugs to be manufactured or distributed through partnerships:

(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.

(e) Before effectuating a partnership pursuant to this section, CHHSA shall consider the volume of each generic prescription drug over a multiyear period to support a market for a lower cost generic prescription drug, if volume is an important factor in driving down the cost of the drug. For partnerships involving procurement, CHHSA shall determine minimum thresholds for procurement of an entity’s expected volume of a targeted drug from the company or manufacturer over a defined target period. In making advance commitments, CHHSA may consult with the Statewide Pharmaceutical Program and the California Pharmaceutical Collaborative.

(f) The listed entities in paragraphs (2) to (4), 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 (4), 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 may include representation and involvement with the governance of the contractor entity.

(Amended by Stats. 2023, Ch. 42, Sec. 52. (AB 118) Effective July 10, 2023.)